A client wants advice about investing for Armdageddon

[Sweep_the_Leg]

Are you my financial advisor?

[brain_wash_your_face]

Ok, let’s start a CFA - Survivor’s society. Dues will be astronomoical, but we’ll be able to debate allocation between cigarettes, bunkers and gold.

[Matt_Likes_Analysis]

viceroy has got a point. i should get in with the homies now, white and nerdy style! without a ruthless and gun-wielding crew, you can only last so long. crazy, though not too crazy is the sweet spot. see: Walking Dead.

another method would be to befriend Inuit folks on Baffin Island, Canada or somewhere like that and you could easily survive for quite a long time without much concern for your own well being. tell the guy to claim some atoll in the pacific ocean as his own and live Cast Away style.

[Robotech]

@shootforthestars1

@Carson

10% in farmland and 10% in gold is about as far as I would go. Then have the remaining 80% split between low cost global stock funds and sovereign bonds (maybe throw in some inflation-linked bonds to set him at ease also).

Good one. However, I’d actually invest a decent chunk of the 80% in a volatility derivative of some sort because if we do get close to his scenario being true, vols are going to go through the roof. The point is to make a killing in the runup to that event and cash out in gold.

Do not do this. Discussed in another thread.

[system]

Buy a farm. The client can grow food and self sustain. Furthermore, the client can sell futures on the crop and earn a yield (2%-5%). The land value will increase substantially in the event of the end of times. Has the client considered a nuclear safe bunker full of all necessities for the rest of his/her life?

[rawraw]

Economist had an infographic recently. Farmland has bested the returns of almost all asset classes and the ones it tied with, it had less violatility. According to that infographic, UK Farmland was more violatile and hadn’t appreciated as much as USA. I know buying farm land in Africa seems to be more trendy lately, but this guy wants assets that he could use. Why not recommend farm land and other natural resources, such as timber crops and other stuff that could make money but still have utility when things go down.

[Black_Swan]

^My dad made a killing on midwest farmland but you really don’t get the level of research required to buy a plot. You need local level knowledge and prices will revolve around drainage / water systems, soil content (ph levels, carbons, etc.) and the ability to lease. And investment through a fund is pretty much impossible because funds don’t really exist as they don’t make sense. At the size required to form a fund it makes more sense to manage the farming in house so it invariably ends up as a corporate farm which is what you would have to invest in. But most of them are private. Plus the prices got pretty high about 2 years ago although they’re returning to reason now. And farmland in Africa in my mind is not the best investment. Too much event risk if a recession hits and starving locals see ten thousand acre fields full of food set aside for export trucks, what do you think will happen?

[newsuper]

Thanks guys.

To answer a few questions:

• he is not an important client. In late 2009 he had us sell everything and put it in the bank. He now pays us a nominal fee for some general admin.

• regarding the exact nature of the ‘event’, I don’t think even he knows how/why it will happen. He is convinced however that the banks will fail or perhaps impose a depositors haircut a la Malta.

As has been said, I don’t really see how you can invest for this type of event due to counterparty risk.

[shootforthestars1]

@JBrowntown

@shootforthestars1

@Carson

10% in farmland and 10% in gold is about as far as I would go. Then have the remaining 80% split between low cost global stock funds and sovereign bonds (maybe throw in some inflation-linked bonds to set him at ease also).

Good one. However, I’d actually invest a decent chunk of the 80% in a volatility derivative of some sort because if we do get close to his scenario being true, vols are going to go through the roof. The point is to make a killing in the runup to that event and cash out in gold.

Do not do this. Discussed in another thread.

Ok, you got a link/name for it? I’m curious.

[Griingo]

1. fully encash

2. buy a farm

3. build a bunker

4. stock up on medicine

5. quit your job

6. spend the last of your money hiring Bear Grylls for intensive survival training

7. watch gleefully as it all unfolds

8. make a fortune by initiating a pig based economy

9. eat bacon

[Mike79]

So its nice to see that they sold in 2009 just as the markets were starting to get back on track. (Did they get invested after this?)

I would ask the client to come in for a face to face meeting so that you can discuss their concerns in more detail and your service offering. You need a deeper discovery of what is really bothering him and a more detailed explanation of why he believes the banking system is going to blow up.

Second, I would stick to your investment management process, philosophy and strategies and belief that the banking system is not going to blow up.

If a client is not going to particiapte or follow your advise, all he is really doing is wasting your time (and its looks like your not generating very much revenue either).

If after the meeting, the client doesn’t want to follow your advise, I would fire them.

[Robotech]

@shootforthestars1

@JBrowntown

@shootforthestars1

@Carson

10% in farmland and 10% in gold is about as far as I would go. Then have the remaining 80% split between low cost global stock funds and sovereign bonds (maybe throw in some inflation-linked bonds to set him at ease also).

Good one. However, I’d actually invest a decent chunk of the 80% in a volatility derivative of some sort because if we do get close to his scenario being true, vols are going to go through the roof. The point is to make a killing in the runup to that event and cash out in gold.

Do not do this. Discussed in another thread.

Ok, you got a link/name for it? I’m curious.

Trading Volatility

[brain_wash_your_face]

@gringo\_bob

8. make a fortune by initiating a pig based economy

9. eat bacon

Why would you eat your new captains of industry?

[Greenman72]

@Destroyer_of_Worlds

Guns, ammunition, various types of knives, machetes and other stabbing weapons, light body armor, long-storage-life food (such as MREs, dried and canned food), long-life water containers, extensive first aid kits (including field dressings, blood clotting agents, a collection of various splints, medicines including a wide range of antibiotics and antiseptics) and the construction of a large bunker where all this stuff is stored close to where the client lives would be advised. Most importantly, the bunker should have an outlet garage where a heavily armored, lifted truck or SUV with bulletproofing, run flat all-terrain tires and plenty of reserve gasoline/petrol is stored. However, the client should know that these “investments” are not likely to earn a return, and in fact are very likely to lose value rapidly over time, the longer they are not used.

In short, when Armageddon comes, you need beans, bullets, and body armor.

[Destroyer_of_Worlds]

@Greenman72

In short, when Armageddon comes, you need beans, bullets, and body armor.

Exactly. Yet somehow clients of this variety maintain the mental dichotomy where they (either by irrational pessimism or political beliefs) think the world is going to hell in a handbasket, yet they believe somehow certain segments of the financial markets will remain just liquid and viable enough to support their investment outcomes on the other side of this impending disaster. They don’t get that true Armageddon boils down to consumption, not investment technically, as another poster has eloquently noted.

I feel like telling the doomsayer, look buddy, either the sh!t is going to be REAL thick or it is not going to be that thick. And there is a big difference in the approach depending on where the client ranks on the Sh!t Thickness Assessment Meter (patent pending). If a client uses the words “Armageddon,” or “doomsday,” or starts talking that end-of-the-world-as-we-know-it garbage without any true, well-reasoned economic facts to back up their worldview, that’s when I just have to excuse myself from the room so I can laugh without offending the individual.

[Carson]

@newsuper

Thanks guys.

To answer a few questions:

• he is not an important client. In late 2009 he had us sell everything and put it in the bank. He now pays us a nominal fee for some general admin.

• regarding the exact nature of the ‘event’, I don’t think even he knows how/why it will happen. He is convinced however that the banks will fail or perhaps impose a depositors haircut a la Malta.

As has been said, I don’t really see how you can invest for this type of event due to counterparty risk.

You mean Cyprus! Malta is actually a very stable and well run country. Lots of financial services firms now based there for tax.

[newsuper]

@Carson

You mean Cyprus! Malta is actually a very stable and well run country. Lots of financial services firms now based there for tax.

Whoops, yes I meant Cyprus. To my mind that’s a more likely outcome than the outright failure of the four largest banks in Australia.

[Mike79]

Any update here?

[brain_wash_your_face]

@newsuper

Whoops, yes I meant Cyprus. To my mind that’s a more likely outcome than the outright failure of the four largest banks in Australia.

Not once your future superjacked, gansta kangaroo overlords escape from their prisons and take over the political system. You’ll be wishing you had a bunker then.

[geo]

^WTF?