Friday, February 27, 2015

BOOK REVIEW: Game Plan, by Kevin Freeman

"So the plenty will not be known in the land because of the famine following, for it will be very severe....Then that food shall be as a reserve for the land for the seven years of famine which shall be in the land of Egypt, that the land may not perish during the famine.”
Genesis 41:31...36

"Have I not commanded you? Be strong and of good courage; do not be afraid, nor be dismayed, for the Lord your God is with you wherever you go."
Joshua 1:9

"But if the watchman sees the sword coming and does not blow the trumpet, and the people are not warned, and the sword comes and takes any person from among them, he is taken away in his iniquity; but his blood I will require at the watchman’s hand."
Ezekiel 33:6

Financial terrorism is the greatest threat currently facing the U.S. economy and national security.

In 2012, Kevin Freeman published Secret Weapon, which detailed how the 2008 financial crisis was a foreign attack on the U.S. economy.  Unfortunately, since then, U.S. political leadership has chosen cronyism over preparing for another attack.  Given this reality, Freeman's 2013 follow up Game Plan is a guide for individuals to protect themselves during perilous economic times.

Since 2008, under George W. Bush and Barack Obama (and congresses of both parties), the United States government has spent itself into oblivion.  The Federal Reserve has degraded the value of the dollar.  Productive economic activity is stagnant.  With more attacks on the horizon, the U.S. economy is prostrate.  While the primary battlefield is financial, military weakness and border chaos don't help.

Financial terrorism takes many forms (p. 71).  Examples include: an EMP (72), cyber attacks on financial markets (78-9), Flash Crashes (83), Bear Raids (90), or interest rate shocks (91).  Any of these scenarios could devastate the U.S. and/or Global economy.  From Al Qaeda, to China, to ISIS, to North Korea, to Russia, many of America's enemies have experimented with these capabilities.  Threats come from a variety of sources.

Over the next few years, prepare for economic uncertainty without recent precedent along with major downside risk.  Freeman investigates how various asset classes will act in various scenarios.  The biggest question is whether we face deflation or inflation.  The next major question is whether the dollar loses its status as global reserve currency.  Depending on the scenario, various allocations between precious metals (ch. 5), stocks (ch. 6), cash (ch. 8), and commodities (ch. 10) make sense.  Unfortunately, Freeman doesn't discuss BITCOIN, another avenue for diversification.  Under most circumstances, bonds should be avoided for a few years.

One note on gold: it's a good idea, but it's not a panacea.  Freeman tracks the price of gold from 1263 to 1932 to illustrate how, "for hundreds of years, gold was relatively steady (97)."  The U.S. "constitution also explicitly addresses gold and silver coinage for the states" (100) in Article I, Section 10.  Unfortunately, gold is also subject to confiscation (102) and price manipulation (107).  Over the long run, stocks outperform gold.

Bailouts, government debt, and "quantitative easing" have hobbled the U.S. economy.  This weakened state leaves the U.S. economy perilously vulnerable to financial terrorism.  That terrorism can take a variety of forms and come from a variety of places.  That being said, if you stay calm and adapt with circumstances, you can survive and proper through the coming crises.  To prepare yourself, Game Plan, by Kevin Freeman, is a fantastic place to start.

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