opportunity’s last knock


Tax (Photo credit: Images_of_Money)

How to benefit from the emerging unprecedented transfer of wealth.

First, there are always transfers of wealth happening. However, there is an unprecedented transfer underway right now. If you read this, you can understand the unprecedented shift underway, as well as some of the simplest ways to benefit from it.

Soon, I’m going to explain a few details of what is happening, but the individual details are not especially important really. What is important is simply that you recognize the possibility that there could be an unprecedented transfer underway already.

One way for you to recognize that is for you to actually understand the possibility. Understanding it clearly may motivate you to position yourself to benefit from it tremendously, as well as to easily avoid potentially catastrophic losses. I’ll detail that later.

I actually have spent years educating people about various underlying issues, and I wish to be very clear that just understanding the possibility I am presenting may not be enough to produce action. I can just tell people “what works” (which steps to take) and, without understanding, they can take the appropriate steps… but only if they are willing!

Taking the practical steps is what matters, and understanding why is just one possible motivator to do what it takes get the real practical benefits. Ultimately, understanding is incidental. I have published a variety of indicators about the contracting of global credit markets and real estate markets and so on for the last 7 years (see: https://jrfibonacci.wordpress.com/up-next-investments/) yet the following set of data is among the most accessible and familiar.real-estate

So, here is a background question, solely for purposes of offering you a breakthrough in your understanding of what is going on in global economics: how has the middle class invested in their own bankruptcy in the last 30-40 years? Obviously, that is a question that may startle you already. Bear with me.

Not everyone is willing to look directly at the recent changes in the finances of the middle classes of the industrialized nations. That is, only if one is willing to look at the actual facts could one recognize the simple logic and relevance of the question just above (regarding how the middle class has been investing in bankrupting itself).

Consider that you already know that, in industrialized nations such as the US, the number one most obvious overall economic shift of the last several decades has been the huge shift away from married couples with one adult working… to a wider range of arrangements of households. Of course, there are some married couples with one adult working, but there is a huge increase in two other categories: (1) married couples with two adults working and (2) single adults who work.

Lately, people are less likely to get married and, when they marry, less likely to stay married very long. Further, many married women are

English: An old married couple in Kyrgyzstan, ...

Image via Wikipedia

working, which was extremely uncommon 35 or 40 years ago.

This is such common knowledge that I am not even going to provide data to back it up. If anyone asks for or wonders about specific numbers, the relevant data is easily available.

However, there is more to the story that may not be common knowledge, though it is also all common sense. First, and easiest to recognize, is the huge increase in child care expenses.

When there is one parent at home, child care costs tend to range in the vicinity of… virtually none. Without being directly compensated, housewives provided childcare services in prior decades without the value of that activity being accounted at all. Obviously, the activity was valued, but it was not specifically counted in the sense of taxable transactions of currency units. For tax purposes, in prior decades, the presence of a housewife was just counted as a slight tax break, like as another dependent- not much different than an extra child. The actual value to society was huge, yet unaccounted.

So, speaking of taxes, when two married adults are working, as is very common in recent decades, they tend to stretch into higher tax brackets than when only one was working. So, the tax rates per dollar have actually risen (separately from any tax rate increases), now that so many more of those dollars are taxed at a higher rate because a second adult is adding them to the “married filing jointly” tax returns. In other words, the functional rate for every dollar in that household is higher when the second earner bumps, for instance, 25% of the household’s dollar earnings into the next higher tax bracket.

Family Child Care

In fact, according to Harvard Professor Elizabeth Warren‘s published compilations of data of US families, the average married couple with two kids is paying 28% more taxes in the 2000s than a comparable average married couple with two kids (though generally with only one adult working) did in the early 1970s. So, taxes are up 28% for the average family (if I understand Dr. Warren correctly) while child care expenses are up from nearly zero to several thousand dollars a year for many pre-schoolers. Yes, that is several thousands of dollars per year per relevant child. For couples with both parents working, the child care expenses for a few young kids… can be a rather large fraction of their total household spending.

2010 07 19 - child care  (3)

2010 07 19 - child care (3) (Photo credit: dcarlson54)

Other expenses that, according to Dr. Warren’s compilations, have rocketed in the last few decades are: health insurance premiums (even employer-sponsored health insurance), total expenses for cars (given that more people per capita have one), and, perhaps the biggest single item: the cost of a mortgage. Is that one surprising?

Again, given that so many more adults are single, there has been a huge increase in demand for individual units of housing. Instead of a man and a woman (for instance) living together in one household- which used to be extremely common- there are now a lot of houses with only one adult in the household.

That slow but huge increase in the number of “single adult households” created a long gradual increase in the demand for housing. That increased demand meant that not only did the cost of housing per adult rocket, but also the cost per house (like for a comparable “average” 3 bedroom 1.5 bath home in 1971 and a similar one in 2006). More demand for the same house simply means higher prices for that house.

Combining the growing number of single adult households with aggressive financing by lenders, the construction and real estate industries have boomed. If either or both of the two underlying factors shifts – less single adult households and/or less financing available – then construction and real estate industries would begin to do, well, exactly what they have been doing since mid-2005, a contraction of market value of more than 80% in under 5 years: http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hgx&sid=0&o_symb=hgx&freq=2&time=13

[the linked chart may need adjusting since this was published on Nov 24, 2009.]

So what are the implications for investment markets of this multi-decade demographic trend away from married couples with a single earner… and toward lots of two earner households and single adult households? The average spending per household is way up. If earnings were up just as much or more, then that trend of increasing spending could be sustainable, but guess what?

Rather than a savings rate being 11% on average in 1971, the savings rate was negative on average by 2006. In other words, many people have gone from spending most of what they earn… to spending all of what they earn. That would be the kind of statistic that one would presume to be the end of a trend in rising spending.

In addition to that trend away from saving anything extra, the average family in the mid 2000s carried debt on credit cards equal to 15% of their annual income. In 1971, that figure was… 0%. There was no credit card debt then.

Even more obvious than the vast change in housing prices is the total change in terms of credit card debt (as well as child care expenses). Given that consumer borrowing has rocketed and the savings rate has gone negative, again, the trend of increasing spending (on things like real estate financing, automobile financing, health insurance premiums, child care, and taxes) certainly could be unsustainable- it’s at least possible that the trend has already ended by now, right?

So, how is it that the middle class has invested in their own bankruptcy? They have done it, in short, with debt. Bankruptcy is all about debt- specifically, more debt than a business or household can afford to repay.

For instance, investors (in the middle class or otherwise) could have conservatively rented or purchased less expensive homes- like apartments rather than suburban homes- but the middle class, on average, has instead spent what may be more than it could afford on housing, especially “unprecedented” mortgage packages in recently booming markets like Phoenix or Las Vegas, such as “cash back at close” or huge public subsidies to prop up de-stabilizing markets.

Sure, the middle classes were encouraged to spend so much on housing (often with extremely aggressive real estate speculation, like 0% down sub-prime mortgages being available throughout the US, UK, and EU). That encouragement came through various governmental programs and incentives, but the middle classes were not forced to engage in those programs… and indeed may have lobbied for them aggressively. Lately, the middle class may complain fiercely about the sub-prime lending industry, but didn’t the middle class participate in CREATING that industry… maybe just a little?

People could have also spent less on consumer debt purchases or on the particular cars purchased. It is not like there are not plenty of decent cars from ten years ago still available. People just tend to buy newer cars which they can easily get financed – again, on historically unprecedented terms of 0% down (or, even more aggressive: “cash back at close”) and of course “no payments until…” whenever.

So, with increased speculative borrowing, once those payments start coming due, there is a huge increase in household spending on housing,

Tax Day Tea Party Atlanta, GA

cars, health insurance, taxes, and child care. With uniquely aggressive borrowing and spending, the middle class has invested, simply speaking, in its own bankruptcy.

Sure, if the middle class had earned more per capita, the additional spending could have been sustainable. However, that additional spending was funded by debt. That increased debt was available in large part because of the large increase in adult women working, but also the formation of the credit card industry- which, again, happened “not entirely without” the active and persistent support of the middle classes.

There are just some of the details. Again, no one factor in particular is especially important to me.

Now, some people I know have long acknowledged that there could be a decreasing stability in the mainstream financial system. However, many of those people have reacted to that recognition by demonizing the financial institutions and/or governments. My short comment on that is that I can relate to the sense of rage upon facing the terrifying simplicity of the situation, however, a mature or adaptive response is… to personally adjust anyway.

It does not matter who may be to blame, if anyone. It could be this political party or that one. It could be one politician or another. It could be this program or that one. The British can blame the Americans and the Americans can blame the British. What difference would any of that blaming make?

Does knowing who to blame (especially in a case like this of a huge international shift) have any practical value whatsoever? Blame can be exhausting and depressing, but unless that is the result into which one is committed to investing, blame is not part of the solution to the personal predicaments in which much of the middle class has directly developed through no method other than their own investments (spending and borrowing and so on).

What does matter is how individuals respond to the obviously vast changes of the last few decades- or, first of all, whether people will personally adjust at all or not! Some will invest only in hope (i.e. for a government bail-out) or invest only in anger (toward governments or whoever). Either way, that is neglecting- as in refusing– to make personal adjustments that could benefit those households and businesses.

So are you personally willing to make personal adjustments so you can personally benefit from the vast transfer of wealth underway? If so, keep reading.

In the case of real estate, the adjustment relevant (when a credit market contraction AKA deflationary collapse is imminent) is rather simple: sell. A less favorable variation of that- only a short-term “solution” which, if used in isolation, actually makes the situation worse- is borrowing against any or all remaining equity in a home, while there still is some equity.

The same solution applies to most stock market holdings: sell. In the case of automobiles, the corresponding adjustment is: downsize.

Why are all of these adaptive in the context of a deflationary collapse? Because deflation means that each unit of cash is increasing in purchasing power as credit markets contract (or disappear completely). That is, as there is less and less lending available for purchasing real estate, real estate prices crash. That means that an individual dollar (or euro, yen, etc) can buy a lot more real estate after the housing crash than before. The same principle applies to purchasing a car or a stock share (or commodities): when prices of something are dropping, that is a good time not to own the thing declining in price, but to instead own currency, which gains purchasing power as prices plummet. (Of course, it is even more favorable to already own something that is actually increasing in value relative to the deflating currency. In a deflation, most people are quite unfamiliar with the select investments that would actually gain in purchasing power faster than cash is.)

A few other things especially relevant to do in a deflationary crash are to shelter one’s finances (sheltering both the assets and the revenues) and to aggressively settle ALL unsecured debts. Bankruptcy is only one way to address excess debts. I personally have been involved in several negotiations to settle credit card debts for small fractions of the original debt.

Why are banks so eager to offer to accept 50% or even much less on credit card debt? Perhaps because they know that a massive surge of bankruptcies is coming. The credit card lenders know that in the case of bankruptcies, they may get much less than 50%; in fact, they may get nothing at all in many bankruptcies.

Early in this piece, I mentioned that transfers of wealth are always happening. A simple distinction is that of being on the side of equation in which wealth is being transferred from or… in the position to which wealth is being transferred.

In the case of someone willing to discontinue being in the position of the one literally risking everything (i.e. investing in their own bankruptcy), there is an additional opportunity. However, first one must be willing to stop doing what may have worked well in recent decades but may have already stopped working,

If people are interested in not only avoiding catastrophic losses, but accessing unprecedented gains, there’s one more thing. Through the immense transfer of wealth which you may know already is in fact underway, as evident in market developments of the last few years which I have been forecasting for several years prior to them being clearly evident, there is unprecedented opportunity. Opportunity has been knocking for quite a while, but if you do not open the door, the knocking at your door… may soon stop.

Accessing those unprecedented benefits is also quite easy. To those who are committed to benefiting not just a little- but are open to accepting unprecedented gains- from the immense transfer poised to dramatically accelerate, I am requesting that you contact me immediately.

A huge, historically unprecedented redistribution of wealth is happening… away from the middle class investors who have gambled their futures on uninformed, aggressive speculative borrowing. They have been investing in their own bankruptcies with such aggressiveness that it may be only rather few of them who will be committed and informed enough to maintain financial stability much longer, especially as many businesses (like construction and financing) contract or even disappear, assuming that aggressive political favoritism to specific industries eventually loses momentum (loses support from tax-payers).

So, a sudden concentration of wealth may flow into a rather few hands. Are you willing to open your hands to be among the ones to receive?

Yes, trends always change eventually. Whenever there is a shift in certain values- especially as evident in actual behavioral changes- that is called a trend.

Trends always change eventually, and as trends are changing, some people always benefit more than others. The ones who own (and/or know) what the rest of us come to value are the ones who benefit from the shift in the values of the whole.

Understanding why some benefit from others is ultimately incidental. Being willing to personally accept the available practical benefits of changing trends… can make quite a difference!

Let me know if you would like to join me in accepting the benefits available for those who are grateful rather than merely afraid. Be afraid, yes, but let the fear inform you, pointing you to what you value… to gratitude… to appreciation.

3 Responses to “opportunity’s last knock”

  1. jrfibonacci Says:

    “E” replied (with my reply below):


    While I agree with much of what you say, I don’t believe there is really any way for indidivuals to “benefit” from the coming economic collapse, because in my estimation the entire monetary system has lost its way and must be completely reconfigured for society to continue its advancement.

    I’m therefore less interested in “sheltering” whatever tattered dollars may remain and am instead focusing on new ways to reconfigure our economic system such that debt no longer rests at the bottom of it, and so that money – assuming we continue to buy into a monetary system – once again becomes a tool (means to an end) rather than an object of lust and hoarding (end in iteself.)

    If you have any ideas along the lines of economic reconfiguration, I’d be happy to discuss this further with you!

    My reply:

    [noting that my comments below refer to the background fact “E” and I have corresponded for about one month, including a phone call of around an hour as I recall, and that she has authored at least one book with the word Economics in the title.]

    > I don’t believe there is really any way for indidivuals to “benefit” from the coming economic collapse, because in my estimation the entire monetary system has lost its way and must be completely reconfigured for society to continue its advancement.

    E, you make many references to what I consider ideological fixations/presumptions. The lending system is contracting, yes- perhaps even collapsing. However, the currency system, which ultimately rests on the organized violence of the armed mercenaries of the military courts (the deputy sheriff, riot action teams, armies etc)… is IMO definitively increasing in influence and affluence, though that may change.

    Foreclosures and bankruptcy seizures and the occupations of Iraq and Afghanistan and Diego Garcia are all well-established “systems” that are solid and stable. When the mercenaries of the courts/governments/central bankers show up, they tend to effectively produce certain “economic” results. The deflating of the lending markets was (1) inevitable and (2) could have even been intentionally manipulated by “the elite,” but that does not matter practically.

    The first “benefit” I propose is divestment from shame and resentment and fear…. [edit for this public posting]

    Survival, security, happiness, and the opportunity to lead (i.e. participate from the beginning) in the next stages of human self-organizing… are all optional. There are immense financial profits to be made, but if that was enough for you to act, you might have already done all the research and taken the relevant actions. Both shame and the vanity that we may use to hide it from ourselves and each other… cannot come with us through “the eye of the needle.”

    > I’m therefore less interested in “sheltering” whatever tattered dollars may remain and am instead focusing on new ways to reconfigure our economic system such that debt no longer rests at the bottom of it, and so that money – assuming we continue to buy into a monetary system – once again becomes a tool (means to an end) rather than an object of lust and hoarding (end in iteself.)

    Currency units are energetic charges or reservoirs for influencing the activity of other people, especially the operations of organized violence known as governments (i.e. courts, etc). There are other tools, but currency units are a perfectly functional one. Ask your mortgage company or the cashier at the grocery store (or the deputies or invading militaries when they come to evict you). 😉

    All contracts involving performance over time (promises of “future performance”) are debt. When you agree to show up at a certain place or time, or to pay your phone bill by next Tuesday at 5 pm… those are “contracts” for future performance.

    There could be currency units involved or not (as in barter). Even when there is an instant exchange of tangible goods (no future performance), there may still be the implicit contract that the chicken eggs that you are trading for the cow milk are of a certain quality and so on. Courts are for settling commercial disputes. Kings (pirates?) set them up and run them so that the various servants of the king can get along well enough for them to serve the king/kingdom rather than get mad and kill each other or, worse, de-stabilize the entire commercial system (except if a deflationary de-stablization is actually an intentional coup, etc).

    We cannot get away from integrity as the basis of voluntary human interaction, whether involving debt contracts or instant barter exchanges of tangible goods. Involuntary and coercive interactions are of course available, but communism and fascism are no different than mafia racketeering, except in details like the size of the gang territory or “tax jurisdiction.”

    My background is in astrology and law, no longer the economics propaganda spewed in public schools to influence the behavior of the masses (to govern them). I do not get confused (any more) about ideologies. I get garage sale economics. I get economics as a subset of ecology (which you may know- distinct from conventional “political” economics- by the term Austrian Economics, that is, economics that predicts the actual mundane “economic” behavior of birds, bees, bacteria, algae, primates like humans, etc…).

    For instance, you may have been taught in church not to hoard or lust. They have taught you what is evil and then taught you to worship it with your attention, your resistance, your condemnation.

    When the hummingbird lusts for the flower’s juices, is that sin? When the squirrel hoards for the winter is that evil?

    You have been trained in shame. Who hasn’t?

    > If you have any ideas along the lines of economic reconfiguration, I’d be happy to discuss this further with you!

    The transfer is underway already. Accept the benefits of it gratefully, or resist and condemn and resent it. Either one will have predictable consequences.

    Discussing ideas of how things should eventually be is [IMO] negligent of what there is to do now. I am clear. Are you?

  2. who predicted rising gas prices and the obvious effects? « power of language blog: partnering with reality by JR Fibonacci Says:

    […] 2008: http://www.gold-eagle.com/editorials_08/fibonacci030309.html 2009: https://jrfibonacci.wordpress.com/opportunitys-last-knock/ 2010: https://jrfibonacci.wordpress.com/2010/12/30/adapting-to-rising-gas-prices/ […]

  3. is real estate safe yet? (fear is the root of malignant optimism) | power of language blog: partnering with reality by JR Fibonacci Says:

    […] while his is very concise. I summarize several of her key points within this recent blog: https://jrfibonacci.wordpress.com/opportunitys-last-knock/ . This other blog links directly to her video on youtube, titled “the coming collapse of the […]

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