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Follow the money
Forbes cruise: follow the money

Be prepared for the next phase of the recession and keep watching land prices – if you are nimble, there will be an affordable moment to pick up prime land for your bug-out location.

“I recently spent a week sailing in the warm and sunny waters of the Caribbean on a FORBES investor cruise,” reports one of the magazine’s overpaid columnists in the latest issue.

“Instead of being refreshed by the calming sea air and restful floating digs I came back even more stressed about the market than I was before I left.”

Poor dear. He is right to be stressed.  Asset prices are heading back towards bubble levels last seen before the credit crunch. The sober Economist newspaper reports today that the American stockmarket is “nearly 50% overvalued on the best long-term measure” and “homes are overvalued by almost 30% in Britain and by 50% in Australia, Hong Kong and Spain.”

Do not take comfort from the fact that prices are still well below their peaks. The Japanese stock market still trades at a quarter of the high it reached 20 years ago. The NASDAQ trades at half the level it reached during dotcom mania. “The current combination of high asset prices, low interest rates and massive fiscal deficits is unsustainable. Something has to give,” says the Economist.

“Interest rates will stay low only if growth remains slow. But if economies grow slowly, then profits will not rise fast enough to justify current share prices and incomes will not rise far enough to justify the prevailing level of house prices. If, on the other hand, the markets are right about the prospects for economic growth, and the current recovery is sustained, then governments will react by cutting off the supply of cheap money later this year.”

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It doesn’t add up

The FORBES guy recounts his horror on learning that “on this trip were 100 or so prosperous investors, many of them entrepreneurs with success building both businesses and investment portfolios. Nearly all of them were convinced that the positive effects of the government’s efforts to revive our economy will be short-lived. Some were preparing their portfolios for a double-dip recession.”

At Off-grid we see this as the chance to pick up woodland or agricultural land relatively cheap in about a year’s time. Until then, we’ll be keeping a third of our savings in cash, a third in gold and a third in oil shares. And sell your super-yacht…if you can find a buyer.

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