Prepper Investment Model Portfolio: Aug-Sept-Oct Results 2016

by PrepperDoc
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After 19.2% for the previous year, a loss of 3.4% in the preceding quarter

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It’s time to see how various sectors of the “Prepper Investment Model Portfolio” did in the most recent quarter (Aug-Sept-Oct of 2016).   I suggested this index of 11 sectors that are often of importance to survivalist types, in July 2015.   Each sector was defined based on a publicly available benchmark, and then weightings adjusted so that the total initial portfolio added up to $1000.   Note that the reviews remain one month behind the traditional calendar “quarters”   The index is now 1 year and 1 quarter old.

The first usefulness of such an index is that over time, it allows preppers who are stewards investing for their retirement (should a disaster not occur before that time), to see which sectors are truly making, or losing money.  Some of the alternatives are more easily traded (e.g, “liquid” such as a mutual fund), while others are less liquid (e.g., a house, or rental property), or have hindrances to trading significant amounts of value (e.g., firearms, where significant trading would require obtaining an FFL).   Some can easily be held in a tax-sheltered retirement account, and others are more easily held outright as a possession (e.g., a house).   A second use would be simply to help figure out when to buy more of important assets for your own use, such as firearms or housing, although there are many other considerations on those decisions.

Here are the results after the first 3 months of the 2nd year, using data as of the close of business Monday, 10/31/2016 (Halloween!).   Presented are the starting (even-weighted) value of each sector’s investment (forced to be the same $) at the beginning of this 3-month period, the resulting holding in those areas after 3 months, and the absolute percentage change (gain or loss) in those 3 months:

 

GAIN OR LOSS IN PREVIOUS  THREE MONTHS:

SECTOR 3-MONTHS AGO INVESTMENT CURRENT VALUE PERCENT CHANGE in 3 months
Domestic Large Cap $108.35 $106.06 -2.1
Domestic Small Cap $108.35 $104.50 -3.6
Foreign Stocks $108.35 $108.27 -0.1
Precious Metals Mining $108.35 $88.80 -18.0
Rental Housing $108.35 $102.49 -5.4
REIT $108.35 $95.96 -11.4
Precious Metals $108.35 $101.00 -6.8
House $108.35 $102.44 -5.5
Firearms $108.35 $108.35 0.00
Ammunition $108.35 $125.30 15.6
Money Market $108.35 $108.42 0.1

 

If one started with equal amounts of money in each of the eleven categories, the total absolute return for the most recent quarter alone was a loss of 3.4% in those 3 months.  These percentage changes and total return are NOT annualized; they are simply the gain or loss for this last 3 months of this portfolio, expressed as a percentage, to one decimal place.    As a whole, the index is now valued at $1151.59  ( from $1000,  15  months ago), an absolute return of 15.2% in 15 months.  Obviously, most of that gain occurred in the latter half of the first year of the index.

QUARTER BY QUARTER INDEX RESULTS

1st  3 months’ gain:                  LOSS of 2.5%

2nd 3 month’s gain:                  2.2%

3rd 3 month’s gain:                   10.6%

4th 3 months gain:                    7.7%

 

2nd year

1st 3 months gain:                    LOSS of 3.4%

Different sectors performed very differently, as expected.  (This is one way the investor makes gains, by taking profits from gaining areas and re-investing in now-cheaper losing areas, known as “re-balancing.”)  Winners in the last three months were basically limited to ammunition (and remember the index just looks at one bulk caliber price at one dealer for this sector).   Multiple sectors had losses:   precious metal mining lost 18%, REIT lost 11%, precious metals lost 6.8% and both housing & rental housing lost a bit more than 5%.   In other words, some the incredible gains of the previous two-quarters slipped.

This report is about the index’s performance, not about investing per se, but it is important to point out that,  it would be speculation to predict what will happen in the futureTo avoid such guesswork,  many investment advisers recommend using a mechanistic approach where one simply acquires more of things that are cheaper and sells, or buys less of things that are more pricey.   Such an approach has advantages and disadvantages — it eliminates emotion, but it also discards the wise perception potentially gained over time of why a sector went up or down.  Perceptions can be faulty of course.   (I personally somewhat follow the mechanistic principles taught by a Christian-based investment newsletter group. [2])

Rebalancing:  Investors in a portfolio similar to, or including portions of this one may choose to rebalance as often, or as rarely, as they wish.   There is no guaranteed best frequency of rebalancing.   Common recommendations include once a year.   Thus an actual investor might choose to do nothing, while another, more active investor might sell a portion of their holdings in sectors that did better than the overall loss of 2.3%, in order to purchase in sectors that did worse, and return the portfolio to equal-value-weighted balance..  If there are costs incurred by trading, this might change the picture, of course.

Note: The information here is just that… information and since every situation and outcome is different the above information should not be taken as financial advice, without first consulting a qualified financial adviser. See our full disclaimer here.

BUSY WORK:  KEEPING THE INDEX ITSELF UP-TO-DATE

The job of the index maker is different from that of the investor.   A true index usually is reweighted daily by whatever weighting scheme (e.g, market capitalization, market price, etc) chosen at its outset.   This virtual portfolio was defined as equal value in each sector — but I simply cannot revalue it every day, so quarterly will have to do.   If we revalue it so that each sector returns to $1151/11 = $104.69, here are how the weightings change.   (This information is not that important for you, the investor, but it is important to anyone who wants to check or recompute the index value.)

 

Sector Number Sector Name New Weighting of Benchmark Data
1 Domestic Large Cap 0.5326363
2 Domestic Small Cap 1.8644642
3 Foreign stocks 3.7766835
4 Precious Metal Miners 4.6017436
5 Rental Housing 0..0008872
6 REIT 3.8517170
7 Precious Metals 0..0677625
8 Housing 0.0004470
9 Firearms 0.0791904
10 Ammunition 0.2829450
11 Money Market 1.1517711


REFERENCES:

[1]  Sector definitions:

Domestic large cap stocks, VFIAX, Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT

Domestic small cap stocks, VSMAX. Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0548&FundIntExt=INT

Foreign stocks, VFWAX.  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0570&FundIntExt=INT

Precious metals mining, FSAGX.  Yesterday’s value can be found at:

https://quotes.fidelity.com/ftgw/fbc/ofquotes/mmnet/Charts?SID_VALUE_ID=FSAGX&navBar=true

Rental Housing, defined as  ½ of the median sales price of existing homes  + the accrued rental income calculated by (Consumer price index:  Rent of primary residence [5]) * number of months since last rebalancing).   Current median sales price can be found at: https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N  and c urrent rent can be found at:  https://research.stlouisfed.org/fred2/series/CUUR0000SEHA

REIT (Real Estate Investment Trust), VGSIX,  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0123&FundIntExt=INT

Precious metals, Gold spot price + 15 x silver spot price;  Spot prices at closing time:   http://www.cmi-gold-silver.com/gold-silver-daily-spot-prices/

House, Median sales price of existing homes, St. Louis FED, https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N

Firearms, Entry level AR-10 rifle on Bud’s Gun Shop, cash price,  www.budsgunshop.com

Ammunition, Lowest-priced 1000 rounds of  brass-cased bulk AR15 ammo from Lucky Gunner;  www.luckygunner.com

Money Market Fund, Vanguard VMMXX, initial investment $90.91 + return calculated as 1 year interest minus expense ratio;  https://personal.vanguard.com/us/funds/snapshot?FundId=0030&FundIntExt=INT

[2]  Sound Mind Investing, sminow.com   I have no financial relationship with this group other than purchasing their newsletter.

Stretching Your Resources in Uncertain Times

Guest Post by Jim M

money public domainWith the cost of everything going up and the future uncertain, stretching your resources and re-purposing items becomes more of a necessity. I am always looking for new ways to get the “max for the minimum.”

Some recent posts here reminded me of some of these things.  My grandparents and parents were a young family when the great depression hit. What kinds of things did they do to make ends meet when things were expensive or scarce?

Unfortunately, many of them who went through this period in time are no longer with us. However, I remember a few things they did or heard of them doing, that now, looking back, were obviously brought about by the times they lived in. Even after times improved somewhat, some still stuck to certain ways of doing things. Old habits are hard to break.

Hunting and gardening were basically a given back then. Most everyone outside the city limits did one or both of this along with bartering services for goods. A little carpentry or plumbing work for a couple of chickens.

I remember my grandfather mixing his old used motor oil with a little bit of kerosene and spraying the underside and inner fender wells of his pick up truck just before winter. He claimed it helped protect the truck from incurring rust damage over the winter months. Getting more serviceable years out of the truck.

I am sure environmentalists would have a cow over this nowadays, but it was a way of taking something that didn’t appear to have any usefulness left ,and yet, finding one more use for it. The county used to spray old used oil to keep the dust down on dirt roads during the spring and summer months. Don’t see that happening anymore.

My grandfather saved some wood ashes from his fireplace to sprinkle around his tomato plants in the garden. He claimed it brought more blooms, thus more tomatoes during the growing season.

My grandmother would take apples and make pie filling and apple sauce. She would then take the wasted apple skins and apple cores and boil them down in water to get enough juice to make apple jelly. Finally using the old boiled down skins and cores to slop the pigs along with other scraps.

That was really getting some serious mileage out of your apples. I am sure such things as corn cob jelly and jello came from the same kind of frugal thinking of, “If I could just find one more use for this material.” My grandmother never threw a tea bag out after only “one” use. She also used up every last bit of an orange. Eat the orange, use the zest of the skin in baking and boil the pithy part of the skin to give the kitchen a nice aroma.

I had uncles who made hard cider during prohibition and would play cards all night on the weekends. That was long before my time but seems they still knew how to have a good time even when things were tough. God bless them.

My parents had the 1970’s to deal with, huge interest rates on mortgages, gas lines, inflation and crazy tax rates. My dad worked his hind end off and made pretty descent money. But by the time he paid for the weekly and monthly expenses, it sure didn’t seem that way.

Christmas was the time of year when me and my brothers would get new blue jeans. My mom would take the brand new jeans and wash them on a low load setting to get as much of the blue dye out of the new jeans. Before the washer would spin that water out, she would remove the new jeans and put any of our old faded jeans that still fit along with jean jackets in the dyed water to soak overnight. Gave old jeans and jackets a “little” darker blue look.

How about an old wire clothes hanger as an emergency exhaust hanger for your car. Works in a pinch to get the muffler from dragging on the road. Unfortunately most clothes hangers they are making now are plastic.

A friend of mine has used old pine wood pallets to build cold frames. The wood was free and if you get a couple or a few years use out of it, all the better.

My brother-in-law reloads his own ammo.

Old newspaper can be used for a weed barrier in the garden, gift wrap and I would dare say make a good candidate for emergency toilet paper if cut or torn down into smaller sheets. So would old telephone book pages.

I have also seen some recipes on the net for making logs to burn made with old newspaper. We keep some around to start fires. Anyone remember the old Readers Digest Christmas Trees? They would fold the pages of a Readers Digest a certain way and spray paint and decorate them to look like a Christmas Tree.

I have the tank to an old shopvac that I use as a waste can next to my workbench in the basement. The motor is long gone but still found a use for the tank.

I have found that a simple tarp has many uses other than covering wood piles. I have seen them used to stop a leaking roof until better weather comes along to address the problem properly. I have taken an old tarp that was starting to fray and cut a section out big enough to cover the windshield on my work car. It sits out in the weather and this piece of tarp can be removed in the morning along with the frost. Now I don’t have to scrape ice or run the defroster for 10 minutes before I leave during the cold months.

Saves me some time and a little gas money too. Word to the wise. Don’t put it on the car when they are forecasting freezing rain. Not nearly as easy to remove. I am sure tarps can be used for a temporary shelter in a survival situation.

A couple of years ago, I saw a man on TV claiming that he shaved an entire year with just one disposable razor. AN ENTIRE YEAR! He claimed that leaving the razor wet after you use it is what dulls the razor. The water deteriorates the sharp edge on the blade.

This sounded crazy to me so I decided to try this out. I did not get the same results this guy did by far, however, I will get through this year using a total of 5 replacement blades on my razor. This is based on shaving twice a week, not everyday. Get your whiskers soft with hot water, use a shot of liquid hand soap to lather up and shave as normal. I believe the actual cutting of the whiskers is what dulls the blade, not the water.

So getting the whiskers as soft as possible with hot water and the lubrication of the hand soap is what helps keep the razor sharper for longer. Why are replacement razor blades so expensive? Don’t they mass produce these things by the billions?

My boss has been bringing me in empty plastic jugs that contained cat litter. They have the 2 HDPE marking on the bottom. So far, I have used these to store rain water that we use on our garden. The jugs he brings me hold about 2.6 gallons of liquid. I have even taken old motor oil to Walmart for collection in these jugs. I’m sure there are probably many other uses for these.

We use old baby food jars to store herbs we grew in the garden. The really small jars (2 or 4 ounce ?) are really good for this. I also keep my hardware sorted and orderly at the workbench with the larger jars. Kids have used them to make endless crafts, too.

We reuse storage bags when possible.

I use some of the leaves that come down in the fall to pack in my basement window wells. The basement windows are a cheap, thin glass window. And they are below ground level thus the wells on the outside. I pack these wells as tight as I can with dried leaves during the winter.

It keeps heat from wicking out the thin glass, acting as an insulator and deadens the sound from outside. In the spring. I remove the leaves, bag them with the mulching mower and till them into the garden. I even heard of people using dried tree leaves as insulation during the depression to keep the lower floor of their homes warm. Surrounding the house with a temporary snow-type fencing and filling the void between the house and the fence with dried tree leaves. Then removing the fence and leaves in the spring.

With each passing generation, we lose a little bit of useful knowledge and common sense that was gained by the times in which they lived. I’m not sure of the severity of what’s coming, but I feel some of what they did could serve us well in days ahead.

I am very interested in finding out what you, the readers, could share about what you do and what your relatives did many years ago to cope and survive in uncertain times and stretch what resources are available to the max.

Resources:

The Thrifty Prepper – Expert Tips For Prepping on a Budget

by Lynn

Unfortunately, I am a lot newer to prepping than I would like to admit. That feeling in your gut that something just isn’t right has been there for a while before I finally listened. Now my family struggles to make up for lost time. I have become like a machine in the last years attempting to streamline and speed our progress to feeling like we at least are somewhat “set”. My husband asked me what I wanted for Mother’s Day and I told him an AK-47 was what I wanted the most.

He delivered after selling, scrimping and saving. I was surprised and thrilled. I have gone from being someone who was nervous even having a loaded gun in the house, to someone who is very capable with my weapon. A bad experience with firearms in my late teens made me a little gun-shy (pun intended) even though I grew up in a family that would target practice once a week. Thank god for muscle memory.

I realize that I am far behind most of you as wisdom goes but can offer some information. I have rapidly been reading, watching and gathering as much knowledge as fast as possible. One thing that I have a gift for that may be of some use to readers are my skills with shopping. By utilizing coupons and watching sales, I have been able to rapidly build up a stockpile.

Why I realize many of us may be skittish when it comes to social media, I also know what an excellent tool it can be when it comes to saving money. On Facebook, I have liked sites such as The Frugal Family, Motherhood on a Dime and Thrifty Wifey and when the deals are posted, they scroll across my newsfeed. For instance, today I was able to score 6 -24 packs of Crayola Crayons for .29 each.

Less money on school supplies, stocking stuffers, birthday presents equals more money in the pocket for preps. Kroger’s this week has buy 10 save 5 this week. I will purchase 10 gallons of water for 4.90!

Take advantage of the programs that many drug stores offer. I used to just assume drug stores were to expense to shop at. CVS and Walgreens (the two main drug stores in my area) are like gold mines. They both offer reward programs with Extrabucks being at CVS and Register Rewards available at Walgreens. The websites I mention above are excellent sources that basically spell out which coupon is needed to get the deal you are after.

Sometimes a coupon is not even needed. For example, CVS and Walgreens both will offer contact solution for 8.99 with 8.99 EB or RR back. That equals free! You pay for the product and then upon check out are issued the 8.99 back to be used in the store. I haven’t bought contact solution in two years but have 5 boxes sitting in our pantry/store in the basement. Start looking around to find your favorite sites that fit your situation the best.

I have used coupons/store deals to build up three impressive first aid kits for virtually nothing. I even got the actual first aid kits for free by purchasing two Johnson and Johnson products (at a great discount + coupons). Study sales cycles and get a feel for when things will go on sale next. Walgreens frequently has baking soda and salt on sale for .59 each approximately one a month. Buy the limit and build your pantry up.

You can easily search “Sale Cycles” on the net and find when the most optimal time to buy any given item is. I am on a first name basis with the manager at several stores in my hometown. They help me out so much by pointing me to deals I may have missed and making sure I get a rain check for any items they may not have in stock. I am always polite and thankful and they appreciate it and in return they look out for me.

So get that Sunday Paper and pull those ads/coupons and sit down and make the deals work for you! There are also excellent coupon sites on the web where you can print out coupons as well. Couponmom.com and coupons.com are two of the best. Also, even Sam’s club has jumped in with the preppersJ. They now sell Auguson Farms products at great prices and allow us to build up our stores quickly. Less money on beans and more money on ammo is working out pretty well for us.

Amazon is another great asset. While of us may not have a “Kindle”, you can download the Kindle for PC free and those sites I mentioned above are always alerting me to free books. I have gotten books on how to make soap, can, garden, survival medicine, you name it! While I realize these tools would not be available in a grid down situation, I print or write out the most important information and put it together in a grab and go form.

I have a young daughter and she outgrows shoes and clothes as fast as we guy them. Yard sales, Thrift stores, and Goodwill are a godsend in these times. When I find something at a yard sale that is three sizes too big but in great shape for the right price, I snatch it up and put it a labeled bin with the size on the side. We have picked up a brand new camping cookware set at a yard sale for only 5.00! Our major scores have also been hand crank grinders, old-fashioned washboards, iron skillets and camping gear.

We have been able to accelerate the rate of our prepping by utilizing these sales to gather things that we could never afford to pay full price for. Keep a list of things you are looking for and carry it with you. I almost believe it wills the item to you. Several times I have set out thinking, I hope I can find some shoes for our girl only to happen upon a yard sale with shoes in her size or one size bigger to get us through the school year that are in fantastic shape! I have happened upon a nice dehydrator in this same fashion as well as affordable second-hand tools.

In part of my education, I follow my grandma and grandpa around as they can and garden and they patiently explain to me exactly what they are doing and why. I have also taken to watching documentaries that have changed and challenged me in ways I can’t even explain. If you have not already viewed the documentaries below, they are what shook me awake and I am in complete awe of what our great country is coming to.

Highly recommended and if you are a Netflix customer, free to watch.

We are working on a plan to acquire land and unfortunately, that is a slow process. My biggest fear is looking into my daughter’s eyes and not being able to help her. I know that is not something that needs to be explained to most parents. I learn daily from you all here on this blog and am so thankful for the valuable information that you all share. Thank you for reading.

M.D. Adds : you might also find this post helpful “Prepping on the cheap with coupons!”

A Cashless Society and the Implication for Preppers

by Joe I. (aka village idiot)

For the past few years, the US Government has been trying, through fits and starts, to implement a policy whereby all its payments are made electronically into bank accounts or onto electronic debit cards. The Government recently announced that Social Security payments would all be either electronic entries in bank accounts or EBTcards by sometime in 2013. Payments to retirees are already electronic entries for the most part, and VA checks and other governmental payments will follow suit.

All these actions have supposedly taken place in an effort to save money, yet the savings are minuscule compared to overall spending, and it would take a great leap of faith for one to believe the government is in any way concerned about cutting spending. All evidence points to the contrary, so budget savings are likely a cover for the real reason behind these measures. The private sector has also had a hand in the push for the cashless society, and with the introduction of credit and debit cards have made great strides in the elimination of cash.

For banks and other financial institutions, the less cash they have to handle, the more profit they make. It takes less personnel, less space, and it is easier to handle electronic transactions as opposed to counting, distributing and storing cash. Almost all transfers of funds between financial institutions are already electronic.

There is less and less physical cash circulating in the economy, and the trend is headed toward zero. As preppers, we should be aware of what is happening, and what the implications will be when and if our society becomes basically cashless. Identity theft, fraud, and hacking are already costing society hundreds of billions of dollars, and they will continue to grow in a cashless environment.

Law enforcement will be adjusting resources to deal with these issues, and less money and personnel will be allocated to fight traditional crimes of violence such as assault, burglary, and theft. There will be choices for us to make if we wish to remain viable and independent, and if we wish to maintain our privacy.

I do suggest that people who receive retirement or assistance from the government get the checks delivered to their home if they qualify. Usually, handicapped and sick people can get checks rather than debit cards if they can show a hardship. Naturally, there are forms to be filled out, but it might be worth a try.

I. OPSEC

One of the major problems for preppers in a cashless society will be remaining anonymous and preserving operations security. And not in a military sense of the word, but just day-to-day living and working. In a cashless society, every single transaction of life will be recorded on a computer server somewhere.

What and where you buy food, water, supplies, and all the accoutrements of life will be recorded, and it is very likely that there will be computer programs and algorithms that will automatically flag people who buy certain things or combinations of things that are not approved by a new breed of bureaucrat acting on a bevy of new regulations.

Certain foods, additives, beverages, antiseptics, medicines, and possibly the quantities purchased could be used to identify behaviors and traits in an effort to identify people who might be preppers. For instance, perhaps large purchases of garden seed would set off an alarm somewhere.

II. Freedom of movement

It will be impossible to move around the country without leaving an electronic trail, even if one doesn’t want to. Purchasing gasoline, buying plane or train tickets, restaurant and hotel transactions, and all aspects of travel will leave a trail easy to follow. Of course, travel alone probably wouldn’t have any implications for preppers.

But visits to certain areas will likely get one scrutinized, depending on whether there is tax havens in places one travels, such as certain parts of the Caribbean, or whether one visits some destinations in Latin America or Asia.

Of course, the average prepper won’t have to worry about tax havens and international travel, but some preppers will fall in this category. I don’t want to be too paranoid here, but I do want us as preppers to think about the long-term trends that are now developing and the new regulations being implemented by our government, such as the seizure of passports if one owes back taxes.

III. Healthcare

Another dangerous trend now occurring is the government takeover of healthcare. For years, the payment of insurance, fees and other costs of healthcare have moved more and more into the electronic arena and away from cash. Hospitals and other medical facilities have been in the process of putting patient records on computers for years, and now the government is forcing doctors to make patient’s records into electronic files.

It’s likely that one won’t be able to receive medical care in the near future by paying cash. And records will be made of every visit to the ER, every visit to the doctor, every visit that has anything to do with medical care, with all these records available for government regulators to see. Government programs such as Medicaid and medicare are taking more and more of the overall budget, and sooner or later rationing will have to take place.

The prepper’s strategy here will be to store certain medicines such as antibiotics and other critical drugs, but also to learn remedies that were successful in the past but have been lost in the Age of Modern Medicine. There are numerous books on the subject, and a google search will reveal thousands of possibilities. The Doctor’s Book on Home Remedies is one I like, but do the research.

People who know and practice home remedies will be in great demand in a cashless society. And make friends with a doctor, if possible. I have a personal friend who is a GP, and he is a prepper, although he doesn’t advertise that fact. And I have a nephew in medical school, a niece who is a radiologist and her husband is a nurse.

Given these facts what is a prepper to do? Here are some suggestions that will help, and hopefully allow a prepper to prosper, in no particular order.

A. Gold, silver, and junk silver coins.

A good strategy is to have a small amount of 1/10 oz. gold coins for wealth protection. One can also purchase 1 oz. silver eagles or maple leafs as both are well-recognized in No. America. The most important silver purchase if one lives in the United States are 90% silver coins that were issued before 1965. They are commonly called junk silver. The dimes are the most convenient, but quarter and half-dollars are useful as well.

Let me say that no one should buy any precious metals until they have their other preps in line. And remember, a prepper uses precious metals for insurance and protection, not wealth building. Precious metals are volatile, and trading in and out of them is best left to the experts. Always take delivery of any precious metals you buy. If you don’t have them in your possession, you don’t own them. Most companies have the option to pay you dollars in lieu of the metals if they so desire.

B. Bartering

A great way for preppers to prosper is to build up bartering networks. There is an art to bartering, and one gets better at it if practiced. I go to gun shows quite often and enjoy trying to trade and barter for ammo and supplies. Other places to barter are farmer’s markets and small businesses. Any small business that is locally owned should be on your radar as a barter opportunity.

C. Gardening and animal husbandry

A no-brainer, as raising food will mean one doesn’t have to get it elsewhere. Food security will be the most important aspect of life for preppers. Food storage will last for whatever time period one has prepared, but for the long-term only gardening and animal husbandry will provide a secure source of food. Raising chickens for meat and eggs is probably the most efficient use of resources, but goats for milk and meat pay big dividends as well.

D. Water

Of course, water for survival both for animals and humans is a must. A local, reliable water source is the single most important thing a prepper can have. It can come from a well, pond, creek, spring, lake, reservoir, or river, but the water must be potable. One has to have filters, chemicals or boiling available to them for purifying water, or a combination of the three. Water must be assumed contaminated unless it has been tested or has been consumed from a well for a lengthy period of time. Store plenty of water, but know that one can’t store enough water to last long-term.

E. Hunting, fishing and gathering.

There is no reason that preppers shouldn’t be taking advantage of hunting and fishing opportunities. Most states have generous bag limits for game and fish, so harvesting game that is plentiful, lean and healthier for you is a great strategy.

Fishing can also provide healthy protein, and with little expense one can store fish, either by freezing, smoking or pickling. Another strategy is gathering. Fruits, nuts and berries are mostly bought in grocery stores these days, yet in the past most people planted fruit and nut trees. They grow wild in many places now, so looking for old home places and cruising public lands can help one locate fruits and nuts.

Take a drive in a state or national park or preserve in the spring, and it is easy to identify the trees that are in bloom. Mark them for future harvest. It is not ethical to gather fruit and nuts without permission on private land, but most people would rather see someone use a product rather than see it go to waste. So ask, and give some to the landowner or manager of the property. You will not be disappointed.

F. Networking

Right now is the time to get to know people in your community who could be of assistance in hard times. Get to know your doctor or dentist, make friends with the local farmers at the farmer’s market. Support these farmers if they grow something you don’t, or if you need extra.

Even if it costs a little more, spend a little extra and help the local farmer. Support people who grow organic, or use heirloom seeds for their crops. Shop and get your prescription drugs from a local pharmacist, not Wal-Mart or Walgreens.

Think local first, and if you can get it locally, do it. Make it a habit to visit with older people in your community, either by going to nursing homes or elder centers. Just about every city or small town has these facilities.

The elderly are a wealth of information on farming, ranching, gardening, sewing, soap-making, candle-making and many other activities that were common years ago. Seek out that information. You might just make a new friend as well.

G. Miscellaneous

I would just like to finish with a little advice. Don’t give the appearance of wealth, and don’t stand out. Be humble, be friendly, be helpful, and be a part of your community. No man (or woman) is an island. No one person will thrive in the new economy, but a collection of like-minded individuals can make life decent and livable, and survivable.

Prepper Investment Model Portfolio: May-June-July Results 2016 and ONE-YEAR Results

by PrepperDoc

================

7.7% for the quarter and 19.2% for the year – Not Half Bad!

——————————–

It’s time to see how various sectors of the “Prepper Investment Model Portfolio” did in the most recent quarter (May-June-July of 2016).   I suggested this index of 11 sectors that are often of importance to survivalist types, in an article written at the end of July 2015.   Each sector was defined based on a publicly available benchmark price, and then weightings adjusted so that the total portfolio (at the beginning) added up to $1000.   Note that the reviews remain one month behind the traditional calendar “quarters”.

I’ve been keeping this index now for a full year, so I also report the First Year Results – which are very good.

The first usefulness of such an index is that over time, it allows preppers who are stewards investing for their retirement (should a disaster not occur before that time), to see which sectors are truly making, or losing money.  Some of the alternatives are more easily traded (e.g, “liquid” such as a mutual fund), while others are less liquid (e.g., a house, or rental property), or have hindrances to trading significant amounts of value (e.g., Firearms, where significant trading would require obtaining an FFL).   Some can easily be held in a tax-sheltered retirement account, and others are more easily held outright as a possession (e.g., a house).   A second use would be simply to help figure out when to buy more of important assets for your own use, such as firearms or housing, although there are many other considerations on those decisions.

Here are the results after the fourth 3 months, using data as of the close of business Friday, 7/29/2016.   Presented are the starting (even-weighted) value of each sector’s investment (forced to be the same $) at the beginning of this 3-month period, the resulting holding those areas after 3 months, and the absolute percentage change (gain or loss) in those 3 months

GAIN OR LOSS IN PREVIOUS  THREE MONTHS:

SECTOR 3-MONTHS AGO INVESTMENT CURRENT VALUE PERCENT CHANGE in 3 months
Domestic Large Cap $100.58 $105.89 5.3%
Domestic Small Cap $100.58 $107.72 7.1%
Foreign Stocks $100.58 $101.76 1.2%
Precious Metals Mining $100.58 $119.89 19.2%
Rental Housing $100.58 $111.79 11.1%
REIT $100.58 $113.65 13.0%
Precious Metals $100.58 $107.07 6.5%
House $100.58 $111.86 11.2%
Firearms $100.58 $100.58 0.0%
Ammunition $100.58 $110.99 10.3%
Money Market $100.58 $100.64 0.0%

If one started with equal amounts of money in each of the eleven categories, the total absolute return for the most recent quarter alone was a healthy 7.7% in only 3 months.  These percentage changes and total return are NOT annualized; they are simply the gain or loss for this first 3 months of this portfolio, expressed as a percentage, to one decimal place.    As a whole, the index is now valued at $1191.85 whereas it started at $1000 12 months ago, an absolute return of 19.2% in 12 months.  Obviously, most of that gain occurred in the last 7 months.

QUARTER BY QUARTER INDEX RESULTS

First 3 months’ gain:                LOSS of 2.5%

2nd 3 month’s gain:                  2.2

3rd 3 month’s gain:                   10.6%

Most recent 3 month’s gain:    7.7%

Different sectors performed very differently, as expected.  (This is one way the investor makes gains, by taking profits from gaining areas and re-investing in now-cheaper losing areas, known as “re-balancing.”)  Winners in the last three months were widespread:   precious metals gained 19%; housing values up by 11%, rental up by 11%, REITs up by 11%, ammunition up by 10%, small caps up by 7% and the broader stock market up by 5%.   It was a very upbeat 3-month period for prepper-investor types.   (Remember:  the future could be different…..)

Let’s look at how the various underlying components did over the first year of this index (July 2015 – July 2016):

PREPPER INDEX UNDERLYING SECTORS ONE YEAR RESULTS

AREA Initial Sector Measurement One-year Sector Measurement % Gain in 1 Year
Domestic Large Cap Stocks $195.24 $200.79 2.8%
Domestic Small Cap Stocks $58.27 $58.22 LOSS of 0.1%
Foreign stocks $30.20 $27.74 LOSS of 8.1%
Precious Metals Mining $13.29 $27.76 108.8% gain!!!
Rental Housing $113,200 $124,767.71 10.2%
REIT $26.15 $30.69 17.4%
Precious Metals $1319.38 $1,657.35 25.6%
House $236,400 $247,700 4.4%
Firearms $864.00 $1322 53%
Ammunition $330.00 $319.95 LOSS of 3%
Money Market $90.91 $90.84 LOSS of 0.1%

Of course, anyone who has been invested in precious metals mining knows that this follows many years of disappointment – but that is exactly how rebalancing provides positive returns.

This report is about the index’s performance, not about investing per se, but it is important to point out that,  it would be speculation to predict what will happen in the futureTo avoid such guesswork,  many investment advisers recommend using a mechanistic approach where one simply acquires more of things that are cheaper and sells, or buys less of things that are more pricey.   Such an approach has advantages and disadvantages — it eliminates emotion, but it also discards the wise perception potentially gained over time of why a sector went up or down.  Perceptions can be faulty of course.   (I personally somewhat follow the mechanistic principles taught by a Christian-based investment newsletter group. [2])

Rebalancing:  Investors in a portfolio similar to, or including portions of this one may choose to rebalance as often, or as rarely, as they wish.   There is no guaranteed best frequency of rebalancing.   Common recommendations include once a year.   Thus an actual investor might choose to do nothing, while another, more active investor might sell a portion of their holdings in sectors that did better than the overall loss of 2.3%, in order to purchase in sectors that did worse, and return the portfolio to equal-value-weighted balance..  If there are costs incurred by trading, this might change the picture, of course.

Note: The information here is just that… information and since every situation and outcome is different the above information should not be taken as financial advice, without first consulting a qualified financial adviser. See our full disclaimer here.

BUSY WORK:  KEEPING THE INDEX ITSELF UP-TO-DATE

The job of the index maker is different from that of the investor.   A true index usually is reweighted daily by whatever weighting scheme (e.g, market capitalization, market price, etc) chosen at its outset.   This virtual portfolio was defined as equal value in each sector — but I simply cannot revalue it every day, so quarterly will have to do.   If we revalue it so that each sector returns to $1104.43/11 = $100.40, here are how the weightings change.   (This information is not that important for you, the investor, but it is important to anyone who wants to check or recompute the index value.)

Sector Number Sector Name Previous Weighting of Benchmark Data New Weighting of Benchmark Data
1 Domestic Large Cap 0.5264386 0.5396189
2 Domestic Small Cap 1.8469898 1.8610458
3 Foreign stocks 3.6616472 3.9059152
4 Precious Metal Miners 4.3109646 3.9031012
5 Rental Housing 0.0008946 0.0008686
6 REIT 3.6966998 3.5304688
7 Precious Metals 0.0644886 0.0653755
8 Housing 0.0004508 0.0004374
9 Firearms 0.0759473 0.0819592
10 Ammunition 0.3462748 0.3386469
11 Money Market 1.1056159 1.1927937

REFERENCES:

[1]  Sector definitions:

Domestic large cap stocks, VFIAX, Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT

Domestic small cap stocks, VSMAX. Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0548&FundIntExt=INT

Foreign stocks, VFWAX.  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0570&FundIntExt=INT

Precious metals mining, FSAGX.  Yesterday’s value can be found at:

https://quotes.fidelity.com/ftgw/fbc/ofquotes/mmnet/Charts?SID_VALUE_ID=FSAGX&navBar=true

Rental Housing, defined as  ½ of the median sales price of existing homes  + the accrued rental income calculated by (Consumer price index:  Rent of primary residence [5]) * number of months since last rebalancing).   Current median sales price can be found at: https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N  and c urrent rent can be found at:  https://research.stlouisfed.org/fred2/series/CUUR0000SEHA

REIT (Real Estate Investment Trust), VGSIX,  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0123&FundIntExt=INT

Precious metals, Gold spot price + 15 x silver spot price;  Spot prices at closing time:   http://www.cmi-gold-silver.com/gold-silver-daily-spot-prices/

House, Median sales price of existing homes, St. Louis FED, https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N

Firearms, Entry level AR-10 rifle on Bud’s Gun Shop, cash price,  www.budsgunshop.com

Ammunition, Lowest-priced 1000 rounds of  brass-cased bulk AR15 ammo from Lucky Gunner;  www.luckygunner.com

Money Market Fund, Vanguard VMMXX, initial investment $90.91 + return calculated as 1 year interest minus expense ratio;  https://personal.vanguard.com/us/funds/snapshot?FundId=0030&FundIntExt=INT

[2]  Sound Mind Investing, sminow.com   I have no financial relationship with this group other than purchasing their newsletter.

The Truth About Precious Metals for Survivalists

by Dan Novak

There are a few common misconceptions associated with precious metals and how they may not be helpful to a preparedness plan for either a SHTF scenario or potential economic collapse.

1. If I can’t eat it, drink it, or use it to defend myself, I don’t need it.

2. I’ll just get stuck buying some worthless coins and never get anything out of them.

Although these are some generally popular perspectives, they are completely misguided and incorrect. So how can precious metals be useful for survivalists when the economy collapses?

The truth is, precious metals are essential for survivalists and will help you stay prepared for all sorts of upcoming turmoil. Below, you’ll find rebuttals to the common misconceptions about gold and silver and how they can literally save your life when the SHTF…

1. “If I can’t eat it, drink it, or use it to defend myself, I don’t need it.”

Precious metals have been used as a stable store of value and a medium of exchange for thousands of years. Although you cannot actually eat, drink or use it to defend yourself you can use it in barter or trade to get any potential needed items.

For example, if you are trying to trade with a neighbor for ammunition and you only have water, food, ammunition and first aid, chances are, he/she has those exact items also. You need to pay with something that can be used as a medium of exchange so that your neighbor can buy whatever he/she may need from someone else.

You won’t always know what people may need in a barter or trade situation. That’s why having a form of currency is essential!

2. “I’ll just get stuck buying some worthless coins and never get anything out of them.”

I say this to prospective precious metals buyers, it seems like, a thousand times a day:

“Stay away from collectible coins! Don’t do it!”

Collectible coins, or “numismatic coins,” are like art. Their value is largely subjective. Some people might pay millions of dollars for the Mona Lisa. Personally, I wouldn’t pay 20 bucks for it!

Don’t put yourself in a hard spot to try to get a buyer who will pay as much as you did to get some mint special coin. The liquidity just isn’t there when compared to gold and silver coins, bars, and rounds that are traded at their melt value.

So buy BULLION!

Bullion is the term that is used when trying to buy precious metals closest to the spot (sometimes called stock market) price. Ask your buyer, if they don’t have it listed, how much over spot you are paying per ounce. The price of gold and silver is fully transparent and can be determined around the clock around the world. Getting the lowest price per ounce is generally the smartest choice.

After the 2008 real-estate fiasco, the economy was trash! In 2011, however, silver jumped up to $40 an ounce even though the rest of the country and economy were still trying to pull themselves out of the grave. Precious metals are not only a good option for a survivalist perspective but they also help to hedge against inflation and perform well in periods of economic turmoil.

What You Need to Know for a Survivalist/SHTF Scenario

In a barter/trade situation it’s important to remember that having different sizes and metals is always smart. Having Pre-65 junk silver is a great option, it is in smaller fractional sizes, and, because it is 90% silver (containing 10% copper), it will wear well being handled more frequently.

Silver rounds, especially in the smaller fractional sizes, is also an attractive option. And consider getting gold for some larger cost barter situations too. Fractional gold coins are small but carry a larger amount of value compared to silver.

With our government racking up a national debt of over 19 TRILLION dollars and climbing, it’s time to start preparing for our currency to be obsolete in SHTF scenarios…
Remember: “You won’t always know what people may need in a barter or trade situation. That’s why having a form of currency is essential!”

Dan Novak is an avid survivalist and precious metals specialist at Money Metals Exchange. Staying educated on economic turmoil and maintaining a survivalist mentality are incredibly important in the world we live in today.

5 Simple Things to Know Before Investing in Gold

By Alban G –

Since the value of other types of investment is flexible and dynamic, investing in gold can be a good way to create a diversified financial portfolio. Investing in gold can also work as a lifetime insurance plan for you.

Thus, in the unpredictable market of today, investing in gold is a very good decision. However, since it is a huge investment, there are a few things you should keep in mind before purchasing gold in bulk. The most important things to know before investing in gold include:

Research Is A Prerequisite

It is very important to do proper research on what type of gold you should invest your money in. Buying gold bars for investment is very popular among people and a lot of gold dealers offer these bars at low rates with premium costs. You can also choose to buy gold bullion, as there are www.goldbullionaustralia.com.au offering bullion coins at reasonable prices.

Know Where Will You Store It

If you want to keep gold as an investment, you should have a clear idea about storing it. Some common options  to store this precious metal include your home, a safe deposit box and to allocate gold with custodians. Although storing at home is not recommended due to the risk of theft, purchasing a safe deposit box is a good solution.

Stable and Solid Store of Value

Investing in gold is considered a good decision because the price does not fluctuate very often. It is recognized as a stable and solid store of value, and can last for years. The worth of gold is also not directly linked to the inflation or currency rate of a given place. However, the value of gold fluctuates, highly dependent on the demand and supply at any given time period.

Why is Gold the Top Choice for Investment

From all the other precious metals, gold is and always has been the most popular investment. This is because there are certain features that differentiate gold from other precious metals. Some of the most important factors include:

  • Gold can be easily divided into pieces. It does not take much time or effort to split it.
  • With the strong intrinsic value, the price of gold never seems to deteriorate.
  • It is a very durable and precious metal.

Who Invests in Gold?

The market for gold buyers is very dynamic and diverse. Different types of investments in gold are suitable to various groups. Currently, gold investments are very common among newly married couples, retired professionals and collectors. Many people buy gold just to increase the worth of their financial portfolio. Regardless of the reason, investing in gold is a top choice for most people because of all the factors that differentiate it from other investments.

Preserving and Creating ‘Wealth’

Today we present another article in our non-fiction writing contest  Steve

Avoiding loss of one’s ‘wealth’ from whatever crises may befall you and/or your family seems paramount to helping avoid or at least mitigate the negative consequences that accompany emergencies and disasters, or even the general decline of civilisation. With currency devaluation, government overreach, civil unrest, bank bail-in legislation, labour strife, market corrections, negative interest rates, geopolitical uncertainty, economic decline (perhaps even collapse), it seems almost impossible to protect one’s wealth completely without even worrying about everyday calamities that can place financial stress upon an individual and/or family. The following suggestions seem the most likely way to prepare for an uncertain world, and avoid some of the more dire consequences of increasing volatility and possible confiscation by the-powers-that-be (a concern that must be considered as governments become increasingly insolvent).

It also seems prudent to reduce dependency on complex systems that are prone to disruptions over which you have no control, such as distant supply chains or infrastructure frailties–that is why I believe at the base of your thinking should be a desire for yourself/family/community to become more resilient and self-sufficient. (Note: I have included links to articles found on The Survivalist Blog only to keep the discussion ‘in-house’; and, the information that follows is not meant to be investment ‘advice’ but one person’s thoughts on how to prioritise ‘investments’.)

A common question that arises when contemplating emergency/disaster planning is where to start?

First, focus on yourself and basic survival gear.

Skills and knowledge you acquire are the most difficult to be taken from you. First Aid courses. Fitness/healthcare-oriented activities. Hunting courses. Archery/gun use. Gardening/food production knowledge. Survival training. ‘Handyman’ skills. Building a ‘survival’ library. Activities, training, and literature that can help you and your family cope with unexpected crises are perhaps the wisest ‘investment’ and can’t be confiscated by the-powers-that-be. These should likely be a priority.

http://www.thesurvivalistblog.net/survival-medical/

http://www.thesurvivalistblog.net/survival-homestead/

http://www.thesurvivalistblog.net/mindset-and-survival/

Basic ‘survival gear’ is necessary to stay alive in the face of a crisis: water, food, medical supplies, and shelter are the four primary components here.
http://www.thesurvivalistblog.net/survival-gear-reviews/

Having access to potable water is a must. A water filtration system, rain barrels, well, bottled water supply, etc. that can provide back-up to government-provided system.
http://www.thesurvivalistblog.net/water-storage-purification-filters/

Access to food is also a must. A well-stocked pantry, greenhouses, garden beds, seeds, fruit trees/bushes, seed propagation supplies, food preservation equipment, hunting/trapping gear removes the need for reliance on distant supply chains that can be disrupted in any number of ways.

Accidents happen. Having some medical/first aid training and supplies will help avoid the consequences that can accompany the most benign of medical emergencies.
http://www.thesurvivalistblog.net/survival-medical/

As for shelter, if you own your own home, great. Make sure it is maintained and can withstand your region’s weather volatility (e.g. adequate insulation and wood-burning stove in northern climes). If you don’t own your current shelter, look towards purchasing something suitable with extended family members or like-minded friends. If you believe security of your residence could be an issue, invest in ‘fortifying’ it.

I would add to this list of ‘personal’ investments the notion of investing in your local community. You are likely to increase your chances of ‘surviving’ a broad-based disaster if your neighbours are equally prepared and like-minded. Do you have a skill or trade that you could teach/share with others? Does your community have a disaster-preparedness plan? What can you do to help prepare your neighbourhood/town? Don’t preach, but teach.

Second, if you are fortunate enough to have the above relatively covered and still have ‘wealth’ to invest, look at and evaluate your ‘investments’ within the current monetary/financial system. Having no education or background in any fiduciary capacity, I would not begin to advise others around business or market investments. That being said, there are some basic precautions I would suggest contemplating.

The fiat currency/monetary system we have been forced to participate in is a relatively recent experiment in human history and history-to-date has not been kind to the attempts by central planners to control financial/market interactions as they wish for very long. Economic decline/collapse has been a recurrent theme in large, complex societies and there is little evidence to justify a belief that ‘this time will be different’ for our civilisation. Despite a lot of people attempting it, predicting which way a complex system of this nature will go or behave is pure guesswork. Just knowing, however, that history is ripe with failed (and similar) experiments is enough to warrant extreme caution and prudence.

Pay off debt. Debt has a cost. Even though interest rates may never ‘normalise’ again, the interest that must be paid is a burden on future income–something I wish our governments would pay heed to.

Minimize paper ‘wealth’. Money in the bank or other financial institutions can disappear in a heartbeat; look at Cyprus and Greece for recent examples. It can be confiscated by the government or by the institution itself. Increasingly, governments are passing bail-in legislation, opening the door to depositor funds being taken to recapitalize insolvent banks. You could lose your deposits completely or be forced to receive bank ‘equity’ in lieu of your savings so reduce your exposure to these risks.

If some of the more likely scenarios arise, it seems important to have some cash/fiat currency on hand. For example, capital controls that limit withdrawals are becoming more commonplace, as are negative interest rates that eat into the purchasing power of your currency. Of course, the simple pursuit of inflation by our central banks ensures our fiat currency loses purchasing power everyday.

Purchasing precious metals is another possible means of protecting wealth and one advocated by numerous people. If this is something you wish to pursue, I would avoid paper forms (i.e. exchange-traded funds or certificates) and stick to physical delivery, storing the bars/coins in a secure, nearby location. Even precious metals can be confiscated, as FDR did in the 1930s, so possession of them is not foolproof (this caveat could almost apply to any of the wealth-storage mechanisms discussed here–history is replete with examples of insolvent governments going to any length to steal wealth from its citizens; including murder and redistribution of lands and money).

The above ‘advice’ is what I’ve learned as I’ve stumbled through my own awakening or fall into the rabbit’s hole of emergency preparedness and kept abreast of world issues. No one knows what the future holds. However, I believe the best evidence for what may occur ‘tomorrow’ is what occurred ‘yesterday’. I completed a post-graduate degree in anthropology/archaeology (before going into education for my career–since retired), and if there is one recurrent theme in our pre/history, it’s that all civilisations eventually decline. That decline may be relatively slow, as displayed by the Roman Empire, or relatively quick, as seen in the two to three generations of collapse on Easter Island. Even a slow degeneration can be accompanied by episodic catastrophes; imagine the chaos if the electrical grid were to suddenly cease functioning–and we don’t require an EMP incident for this to happen as experienced during the 2003 Blackout.

We live in a complex, globalised world where a coalescence of small failures can snowball into a crisis of epic proportions because of the interconnectedness of the various subsystems we depend upon. And this doesn’t even take into account a Black Swan event that could completely send all previous assumptions sideways in an unknowable direction. I honestly don’t know if there is any absolutely right or wrong way to create or preserve one’s wealth. A lot will depend upon personal abilities, preferences, and comfort level. Do what you can and are able to do while feeling comfortable in your choices. Every small step on the road to self-sufficiency and resiliency brings you and your family more freedom and independence, and increases the likelihood of successfully weathering the unpredictability of the future.

Prizes For This Round Include: (Ends July 29, 2016)

First Prize:

Second Prize: 

Third Prize:

Please read the rules that are listed below BEFORE emailing me your entry… my email address can be found here – please include “writing contest entry” in the subject line.

The more original and helpful your article is, the deeply and less basic it is, the better the chance, that I will publish it, and you will win. Only non-fiction how-to-do-it type articles, please.

Prepper Investment Model Portfolio: Feb-Mar-Apr Results 2016

Today we present another article in our non-fiction writing contest  PrepperDoc

It’s time to see how various sectors of the “Prepper Investment Model Portfolio” did in the most recent quarter (Feb-Mar-Apr of 2016).   I suggested this index of 11 sectors that are often of importance to survivalist types, in an article written at the end of July 2015.   Each sector was defined by some publicly available benchmark price, and then weightings adjusted so that the total portfolio added up to $1000.  The definitions of the sectors are repeated below in [1].  Note that the Index reviews are one month behind traditional calendar “quarters”.

The first usefulness of such an index is that over time, it allows preppers who are stewards investing for their retirement (should a disaster not occur before that time), to see which sectors are truly making, or losing money.  Some of the alternatives are more easily traded (e.g, “liquid” such as a mutual fund), while others are less liquid (e.g., a house, or rental property), or have hindrances to trading significant amounts of value (e.g., Firearms, where significant trading would require obtaining an FFL).   Some can easily be held in a tax-sheltered retirement account, and others are more easily held outright as a possession (e.g., a house).   A second use would be simply to help figure out when to buy more of important assets for your own use, such as firearms or housing, although there are many other considerations on those decisions.

Here are the results after the third 3 months, using data as of close of business Friday, 4/29/2016.   Presented are the starting (even-weighted) value of each sector’s investment (forced to be the same) at the beginning of this 3-month period, the resulting holding those areas after 3 months, and the absolute percentage change (gain or loss) in those 3 months:

GAIN OR LOSS IN PREVIOUS  THREE MONTHS:

SECTOR 3-MONTHS AGO INVESTMENT CURRENT VALUE PERCENT CHANGE in 3 months
Domestic Large Cap $90.75 $96.62 6.50%
Domestic Small Cap $90.75 $100.70 11.00%
Foreign Stocks $90.75 $97.54 7.50%
Precious Metals Mining $90.75 $151.08 66.50%
Rental Housing $90.75 $90.19 -0.60%
REIT $90.75 $96.32 6.10%
Precious Metals $90.75 $106.04 16.80%
House $90.75 $90.19 -0.60%
Firearms $90.75 $104.96 15.70%
Ammunition $90.75 $79.98 -11.90%
Money Market $90.75 $90.81 0.10%

 

If one started with equal amounts of money in each of the eleven categories, the total absolute return for the first quarter of this index was a healthy 10.6% in only 3 months.  These percentage changes and total return are NOT annualized; they are simply the gain or loss for this first 3 months of this portfolio, expressed as a percentage, to one decimal place.    As a whole, the index is now valued at $1104 whereas it started at $1000 nine months ago, an absolute return of 10.4% in 9 months.  Obviously, most of that gain occurred only recently.

Different sectors performed very differently, as expected.  (This is one way the investor makes gains, by taking profits from gaining areas and re-investing in now-cheaper losing areas, known as “re-balancing.”)  By far and away, precious metals mining stocks won, at an astounding positive 66.5%, with precious metals themselves posting  a respectable 16.8% gain.   The representative firearm  (an AR-10 style) did very well at 15.7%, and the stock markets did pretty well also!   It was an upbeat 3-month period.   The ammunition sector saw a new competitor product, a reloaded and less expensive bulk .223 offering, which resulted in a loss in that sector (but cheaper prices for consumers).   It was a happy quarter!  Of course, anyone who has been invested in precious metals mining knows that this follows many years of disappointment – but that is exactly how rebalancing provides positive returns. .

This report is about the index’s performance, not about investing per se, but it is important to point out that,  it would be speculation to predict what will happen in the future.  To avoid such guesswork,  many investment advisers recommend using a mechanistic approach where one simply acquires more of things that are cheaper and sells, or buys less of things that are more pricey.   Such an approach has advantages and disadvantages — it eliminates emotion, but it also discards the wise perception potentially gained over time of why a sector went up or down.  Perceptions can be faulty of course.   (I personally somewhat follow the mechanistic principles taught by a Christian-based investment newsletter group. [2])

 

Rebalancing:  Investors in a portfolio similar to, or including portions of this one may choose to rebalance as often, or as rarely, as they wish.   There is no guaranteed best frequency of rebalancing.   Common recommendations include once a year.   Thus an actual investor might choose to do nothing, while another, more active investor might sell a portion of their holdings in sectors that did better than the overall loss of 2.3%, in order to purchase in sectors that did worse, and return the portfolio to equal-value-weighted balance..  If there are costs incurred by trading, this might change the picture, of course.

Note: The information here is just that… information and since every situation and outcome is different the above information should not be taken as financial advice, without first consulting a qualified financial adviser. See our full disclaimer here.

BUSY WORK:  KEEPING THE INDEX ITSELF UP-TO-DATE

The job of the index maker is different from that of the investor.   A true index usually is reweighted daily by whatever weighting scheme (e.g, market capitalization, market price, etc) chosen at its outset.   This virtual portfolio was defined as equal value in each sector — but I simply cannot revalue it every day, so quarterly will have to do.   If we revalue it so that each sector returns to $1104.43/11 = $100.40, here are how the weightings change.   (This information is not that important for you, the investor, but it is important to anyone who wants to check or recompute the index value.)

Sector Number Sector Name Original Weighting of Benchmark Data New Weighting of Benchmark Data
1 Domestic Large Cap 0.5066000 0.5264386
2 Domestic Small Cap 1.8524000 1.8469898
3 Foreign stocks 3.5574000 3.6616472
4 Precious Metal Miners 6.4867000 4.3109646
5 Rental Housing 0.0008036 0.0008946
6 REIT 3.5463000 3.6966998
7 Precious Metals 0.0681100 0.0644886
8 Housing 0.0004050 0.0004508
9 Firearms 0.0793963 0.0759473
10 Ammunition 0.2758359 0.3462748
11 Money Market 1.0217676 1.1056159

 

 

 

REFERENCES:

[1]  Sector definitions:

Domestic large cap stocks, VFIAX, Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT

Domestic small cap stocks, VSMAX. Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0548&FundIntExt=INT

Foreign stocks, VFWAX.  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0570&FundIntExt=INT

Precious metals mining, FSAGX.  Yesterday’s value can be found at:

https://quotes.fidelity.com/ftgw/fbc/ofquotes/mmnet/Charts?SID_VALUE_ID=FSAGX&navBar=true

Rental Housing, defined as  ½ of the median sales price of existing homes  + the accrued rental income calculated by (Consumer price index:  Rent of primary residence [5]) * number of months since last rebalancing).   Current median sales price can be found at: https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N  and c urrent rent can be found at:  https://research.stlouisfed.org/fred2/series/CUUR0000SEHA

REIT (Real Estate Investment Trust), VGSIX,  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0123&FundIntExt=INT

Precious metals, Gold spot price + 15 x silver spot price;  Spot prices at closing time:   http://www.cmi-gold-silver.com/gold-silver-daily-spot-prices/

House, Median sales price of existing homes, St. Louis FED, https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N

Firearms, Entry level AR-10 rifle on Bud’s Gun Shop, cash price,  www.budsgunshop.com

Prizes For This Round (Ends July 29, 2016) In Our Non-Fiction Writing Contest Include…

First Prize:

Second Prize: 

Third Prize:

Please read the rules that are listed below BEFORE emailing me your entry… my email address can be found here – please include “writing contest entry” in the subject line.

The more original and helpful your article is, the deeply and less basic it is, the better the chance, that I will publish it, and you will win. Only non-fiction how-to-do-it type articles, please.

Prepper Investment Model Portfolio: First 6 Months’ Outcome

By PrepperDoc

This is an entry in our non-fiction writing contest.

It’s time to see how various sectors of the “Prepper Investment Model Portfolio” did in its second quarter (Nov-Dec-2015-Jan-2016).  I first suggested this index of 11 sectors that are often of importance to survivalist types, in an article written at the end of July 2015.   Each sector was defined by some publicly available benchmark price, and then weightings adjusted so that the total (original) portfolio added up to $1000.  The definitions of the sectors are repeated below in [1].

The first usefulness of such an index is that over time, it allows preppers who are stewards investing for their retirement (should a disaster not occur before that time), to see which sectors are truly making, or losing money.  Some of the alternatives are more easily traded (e.g, “liquid” such as a mutual fund), while others are less liquid (e.g., a house, or rental property), or have hindrances to trading significant amounts of value (e.g., Firearms, where significant trading would require obtaining an FFL).   Some can easily be held in a tax-sheltered retirement account, and others are more easily held outright as a possession (e.g., a house).   A second use would be simply to help figure out when to buy more of important assets for your own use, such as firearms or housing, although there are many other considerations on those decisions.

Here are the results after the second 3 months, using data as of 1/29/2016 (close of the business month).   Presented are the  original (even-weighted) value of each sector’s investment (forced to be the same), the resulting holding those areas after 6 months, and the absolute percentage change (gain or loss) in THE MOST RECENT THREE MONTHS:  (Recall that the index was rebalanced again to equal sector value after the first quarter.)

GAIN OR LOSS IN SECOND THREE MONTHS:

SECTOR ORIGINAL INVESTMENT CURRENT VALUE PERCENT CHANGE

In most recent quarter

Domestic Large Cap $90.91 $82.84 -6.7%
Domestic Small Cap $90.91 $79.57 -10.4%
Foreign Stocks $90.91 $80.27 -9.6%
Precious Metals Mining $90.91 $85.82 -3.4%
Rental Housing $90.91 $89.71 +1.0%
REIT $90.91 $85.65 -3.6%
Precious Metals $90.91 $85.94 -3.3%
House $90.91 $89.71 +1.0%
Firearms $90.91 $138.33 +55.7%
Ammunition $90.91 $91.61 +3.1%
Money Market $90.91 $88.82 0.0%

If one started with equal amounts of money in each of the eleven categories, the total return for the second quarter of this index was a gain of 2.2%, almost perfectly correcting the loss the portfolio endured in its first quarter, and returning the total value of the portfolio to $998.28. (Portfolio began at $1000 6 months ago).  These percentage changes listed in the table are NOT annualized; they are simply the gain or loss for this second 3 months of this portfolio, expressed as a percentage, to one decimal place.   Comparing the “current value” (before rebalancing) to the original investment ($90.91 in each sector) you can see that, over 6 months in this portfolio,  some sectors  have done much better than others!

ANALYSIS [This is NOT investing advice…see the Disclaimer below.]

 Different sectors performed VERY differently in the tumultuous quarter we just experienced. (This is one way the investor makes gains, by taking profits from gaining areas and re-investing in now-cheaper losing areas, known as “re-balancing.”)  Stocks lost considerably in this last quarter, with small caps and foreign performing the worst.  Precious metals, and their mining stocks, also lost, though not quite as badly.  Housing and rental eked out a small profit, but the BIG NEWS was in firearms, which in this index, posted a phenomenal gain of more than 50% — the vendor specified in the definitions seems to have been cleaned out of inexpensive AR-10’s, and the lowest-priced remaining model is CONSIDERABLY more expensive than 3 months ago, leading to huge gains in this particular sector (as defined). Your firearm collection may have gained considerable value.   Ammunition also posted a winning quarter, although nowhere near that of firearms as defined in this index!

This report is about the index’s performance, not about investing per se, but it is important to point out that, it is speculation to predict what will happen in the future.  To avoid such guesswork, many investment advisors recommend using a mechanistic approach where one simply acquires more of things that are cheaper and sells, or buys less of things that are more pricey.   Such an approach has advantages and disadvantages — it eliminates emotion, but it also discards the wise perception potentially gained over time of why a sector went up or down.  Perceptions can be faulty of course.   (I personally somewhat follow the mechanistic principles taught by a Christian-based investment newsletter group. [2])

Rebalancing:  Investors in a portfolio similar to, or including portions of this one may choose to rebalance as often, or as rarely, as they wish.   There is no guaranteed best frequency of rebalancing.   Common recommendations include once a year.   Thus an actual investor might choose to do nothing, while another, more active investor might sell a portion of their holdings in sectors that did better than the overall last quarter gain of 2.2%, in order to purchase in sectors that did worse, and return the portfolio to equal-value-weighted balance.  If there are costs incurred by trading, this might change the picture, of course.

BUSY WORK:  KEEPING THE INDEX ITSELF UP-TO-DATE

The job of the index maker is different from that of the investor.   A true index usually is reweighted daily by whatever weighting scheme (e.g, market capitalization, market price, etc) chosen at its outset.   This virtual portfolio was defined as equal value in each sector — but I simply cannot revalue it every day, so quarterly will have to do.   If we revalue it so that each sector returns to $998.28/11 = $90.75, here are how the weightings change.   (This information is not that important for you, the investor, but it is important to anyone who wants to check or recompute the index value.)

Sector Number Sector Name Original Weighting of Benchmark Data New Weighting of Benchmark Data
1 Domestic Large Cap 0.4656 0.5066
2 Domestic Small Cap 1.5601 1.8524
3 Foreign stocks 3.0102 3.5574
4 Precious Metal Miners 6.8404 6.4867
5 Rental Housing 0.0008031 .0008036
6 REIT 3.4765 3.5463
7 Precious Metals 0.0689036 0.06811
8 Housing 0.0003846 0.0004050
9 Firearms 0.1052199 0.0793963
10 Ammunition 0.2754848 0.2758359
11 Money Market 1.0000000 1.0217676

Note: The information here is just that… information and since every situation and outcome is different the above information should not be taken as financial advice, without first consulting a qualified financial adviser. See our full disclaimer here.

REFERENCES:

[1]  Sector definitions:

Domestic large cap stocks, VFIAX, Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0540&FundIntExt=INT

Domestic small cap stocks, VSMAX. Yesterday’s value can be found at: https://personal.vanguard.com/us/funds/snapshot?FundId=0548&FundIntExt=INT

Foreign stocks, VFWAX.  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0570&FundIntExt=INT

Precious metals mining, FSAGX.  Yesterday’s value can be found at:

https://quotes.fidelity.com/ftgw/fbc/ofquotes/mmnet/Charts?SID_VALUE_ID=FSAGX&navBar=true

Rental Housing, defined as  ½ of the median sales price of existing homes  + the accrued rental income calculated by (Consumer price index:  Rent of primary residence [5]) * number of months since last rebalancing).   Current median sales price can be found at: https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N  and c urrent rent can be found at:  https://research.stlouisfed.org/fred2/series/CUUR0000SEHA

REIT (Real Estate Investment Trust), VGSIX,  Yesterday’s value can be found at:

https://personal.vanguard.com/us/funds/snapshot?FundId=0123&FundIntExt=INT

Precious metals, Gold spot price + 15 x silver spot price;  Spot prices at closing time:   http://www.cmi-gold-silver.com/gold-silver-daily-spot-prices/

House, Median sales price of existing homes, St. Louis FED, https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N

Firearms, Entry level AR-10 rifle on Bud’s Gun Shop, cash price,  www.budsgunshop.com

Ammunition, Lowest-priced 1000 rounds of  brass-cased bulk AR15 ammo from Lucky Gunner;  www.luckygunner.com

Money Market Fund, Vanguard VMMXX, initial investment $90.91 + return calculated as 1 year interest minus expense ratio;  https://personal.vanguard.com/us/funds/snapshot?FundId=0030&FundIntExt=INT

[2]  Sound Mind Investing, sminow.com   I have no financial relationship with this group other than purchasing their newsletter.

Prizes For This Round (Ends April 12, 2016) In Our Non-Fiction Writing Contest Include…

  1. First place winner will receive –   A gift certificate for $150 off of  rifle ammo at Lucky Gunner, an Urban Survival Kit a $109 value courtesy of  TEOTWAWKI supplies, a WonderMix Deluxe Kitchen Mixer a $299 value courtesy of Kodiak Health and a LifeStraw Mission Filter a $109 value courtesy of EarthEasy, for a total prize value of $667
  2. Second Place Winner will receive – 30 Day Food Storage All-in-One Pail a $119 value courtesy of Augason Farms.com and Berkey Light with 2 (9″) Berkey Earth Elements a $157 value courtesy of LPC Survival, for a total prize value of $276.
  3. Third place winner will receive –  International MRE Meals Supply a $72.00 value, a LifeStraw Portable Water Filter a $19 value, Yoder’s Fully Cooked Canned Bacon a $15 value all courtesy of CampingSurvival and one copy of each of my books “The Prepper’s Primer” and a copy of “The Prepared Prepper’s Cookbook“ for a total prize value of $137.