Personal Security (Published 5/16/06)
Now that precious metals are again approaching a welcome buying opportunity after gold exceeded $700 and silver came close to $15, readers might expect the Optimist to bask in the accolades from his bold projection of those high prices a year ago. Alas, the Optimist fears that his strong statements about higher prices for silver (and gold) may have left readers with the mistaken impression that he thinks silver is the best possible investment. It is time for the Optimist to clearly confess that he views silver as only the second best investment one can make. The most important investment for everyone to focus on first is personal security.
Don't change the channel
Wait! Don't go away yet. This commentary will not descend into the hopeless despair of scenarios about the end of the world. You can count on the Optimist to provide the positive perspective that there is a full spectrum of serious security concerns to prepare for before considering the ultimate catastrophes of a world wide economic collapse, a global pandemic, or a nuclear war. Those topics can be put aside for a later update.
Personal security is not a new concern
Consider this quotation provided to me by GW from Montana:
"The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved." -- Confucius (551 BC - 479 BC)
When everything seems normal, and we all feel overwhelmed by the routine rush to earn a living, take care of our family and friends, and try to invest successfully too, it is all too easy to temporarily forget that we are surrounded by serious risks. At times, we might feel like we are working hard at paddling our canoe across a calm and quiet lake, but we do not see the large sharks and alligators which are submerged and waiting for the best time to strike. It has been said that optimists expect the best (and are frequently disappointed), but pessimists prepare for the worst (and hope that the preparations will be unnecessary). This Optimist presents the positive view that we can be happy in the good times, and also focus some effort on being ready for when the times are not so good.
Why worry about personal security?
The way New Orleans morphed into chaos and violence soon after Katrina is a graphic illustration of how calm and peaceful times can quickly deteriorate into traumatic events. Other natural and man made disasters such as crime, floods, wildfires, earthquakes, tornados, and riots offer clear examples of situations which can abruptly transform normal life into a survival test. People whose lives are suddenly immersed into a serious problem situation may discover that it can be very difficult to find a way to move their family to safety unless they previously prepared for how and where to do so.
Who should consider personal security?
Since some of the questions in this topic are difficult, the Optimist is happy that he can respond to an easy one like this. Everyone is at risk of being exposed to serious security problems, so each person should give some thought to how best to handle those problems. Everyone who thinks they have immunity to the serious problems that could affect all of us should consider that Murphy's Law has not been repealed specifically for them, and that things can go badly wrong anywhere.
What bad things could possibly affect me?
OK, you live in a modern suburb that feels really comfortable, and you don't plan to move to New Orleans before the next hurricane season starts, so you are safe, right? Wish it was that easy. Natural disasters can happen anyplace. People who do not look beyond their own neighborhood can suffer great harm when that entire region experiences a major problem. Big storms, earthquakes, wildfires, etc can completely destroy large areas. No matter how secure a neighborhood may seem in normal times, there is always a risk that crime could spiral into a temporarily uncontrollable and seriously unsafe situation.
Consider what might happen if there is a nationwide trucking strike to protest truckers' inability to earn more than the rapidly rising cost of fuel. Most of the food and fuel for big cities is delivered by truck. A disruption in deliveries would quickly leave large portions of all big cities with inadequate supplies. Inner city residents are not likely to suffer quietly and peacefully as their supply of food runs out. Suburbs surrounding the city will also feel the effects. At the same time, a sharp curtailment of fuel deliveries to gas stations will make gasoline unavailable. People who are poorly prepared may find that it is hazardous to stay in their neighborhood, but that they are also unable to leave.
It is not too difficult to stretch one's imagination to questions about what could happen in a big city if the dollar abruptly collapses in international markets. Interest rates would soar, and prices for everything that is imported would jump sky high. Food would quickly be priced out of reach for most people within large cities, and gasoline would be difficult to buy at any price. The short term results could look a lot like the hypothetical trucking strike discussed above. Staying out of debt, and having one's finances invested in silver, gold, energy, and a host of other inflation proof assets is an excellent way to protect our finances, but we should also consider how well our personal security is protected from comparable risks.
How could we improve our personal security?
The first and most essential step in preparing for possible problems is to consider the threats, and to think about how best to deal with them. For example, crime is always a potential concern, and the Optimist previously offered some advice about reducing one's risk of becoming a victim of crime. The bigger picture of how to prepare for possible international events, or natural disasters, or large scale problems caused by people, however, requires the individual perspective of each reader to find an appropriate solution. Since the Optimist does not have the ability to see through the eyes of each of the readers who will consider this commentary, I will need to limit my advice to general suggestions about things each person should consider.
First, if you can't stand the heat, make sure that you have the ability to get out of the kitchen. There are some serious events which could provide even less warning time than hurricane Katrina did. If you wake up one morning to find a tsunami of events has caused a wall of financial or criminal "water" to rush at you, there may be very little time or ability to react and prepare. At a minimum, each person should have a plan about what they would want to take with them if they need to immediately move their family to safety. It is also a very good plan to always have enough gas in the car to be sure that you can at least get away from the city. A good rule of thumb is to never let a gas tank get to less than half full, and then to refill it quickly at any hint of a potential problem.
Second, it's not enough to know when to hold 'em, know when to fold 'em, know when to walk away, or know when to run. You also should have a good idea about where to go. Although a few readers have offered advice about where they want the Optimist to go, I don't intend to share those directions with you. Instead, my suggestion is that each person should consider the possibility that he may need to quickly move his family out of a possible danger zone around many cities, and then he should formulate the best plan for his situation.
Third, be prepared. It must have been really embarrassing, as reported in news accounts, for the guys who absent-mindedly drove off from gas stations and left the wife or one of the kids behind. In times of serious stress, it is very difficult to remember everything. My advice is to plan in advance, and make a checklist of things to take if you need to get in the car and go.
Where might one invest in personal security?
Oh yeah. This commentary is about investing in personal security. For starters, don't let the gas tank of your car get close to empty while you wait for gas prices to drop a little. Top off the tank often, regardless of the price. Make sure that your family has enough food and water at home to last for several days, and rotate that stock so that your emergency supplies are always fresh. Keep in mind that the electricity we depend upon in so many ways might be unavailable for an extended time after an ice storm or other serious problem, and be sure you have food you can eat without electric power if necessary.
People who have an interest in areas away from a big city, and who have sufficient investment funds, might consider combining those elements. For example, a hunter or fisherman, or camper or weekend farmer who really likes an area within driving distance might consider purchasing or leasing a small amount of land there. If the land has a small cabin, or even a place to pitch a tent, then it could be a good spot for a vacation in good times and an essential destination if an escape plan becomes necessary. Although the financial investment returns from owning that piece of land might not make your accountant's eyes glaze over, the value to your family in improved personal security could be priceless.
When?
If yesterday is an inconvenient time for you, then by all means wait until today to begin working on your own what-if plans. Actually being able to implement your plans will take some time, of course. Fortunately, the Optimist sees no problems on the horizon that require any more of a rush than the residents of New Orleans had a day or two before Katrina hit.
So, what about silver?
It has always been a good guideline that everyone should keep some money handy in case it is needed for an emergency. There have been many times in the past when small problems were solved before they grew into big problems by taking some money out of the cookie jar. It is possible that a future event could make a credit card or a check unacceptable for payment. Real money in your hand will buy more than paper promises. In times of rapidly rising inflation, however, it is really painful to keep fiat $100 bills in your wallet, and watch them shrink in purchasing power each day. The simple solution to the problem of keeping money on hand for emergencies, and not losing the value of fiat through inflation, is to keep some silver set aside and easily accessible. Although any silver rounds or bars would be good, the Optimist is partial to U.S. junk silver dimes, quarters and halves dated 1964 and earlier. Those coins are readily recognized and easily exchanged for other items of comparable value.
Although the rising price of silver is slowly solving the obvious problem that you still get too much silver metal for your fiat paper, even $10,000 buys enough silver that the weight and space are significant. Although there are many alternatives for buying paper forms of silver to simplify the weight and space concerns, investors should be aware that a serious financial event could make paper silver unavailable and unusable. When silver is a part of one's personal security plan, it would be worthwhile to consider being able to get access to the silver without permission or assistance from anyone.
It has been said that a good presentation tells the reader who what, why, when, where and how. The Optimist hopes he has succeeded in connecting the dots to present a picture which encourages readers to consider their own personal security needs.
