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The Train Wreck - Part II PDF Print E-mail
Written by John D. Buerger, CFP®   
Thursday, 17 September 2009 09:01

"That was soooooo last week" - Young Person Today

Last week I said, "There is a train wreck coming."  It is still coming, and I am even more convinced of it now than I was seven days ago ...

... but knowing what's coming is a good thing (and that is a sentiment that may have been missed in last week's post)

I appeared on the Dave Congalton show (a local radio talk show here in San Luis Obispo) on Tuesday.  As much as my observations of current conditions (and analysis of how they could evolve into your future reality) are quite dire, I received a number of comments from listeners and acquaintances that they found the discussion catharctic.  (I will post the audio here as soon as it is available).


Knowledge and awareness are the two most powerful survival tools available to you.  That is why many people (at least the ones who are going to thrive in the next few years) actually like to hear what I have had to say - it gives them an edge.

That is why clients of fiduciary financial planning professionals pay for our services - so they can sleep better at night and enjoy each day more.  In the long run, going through life with your head out of the sand and your eyes wide open beats any of the alternatives.  It prevents the big, ugly surprises.  It helps you build confidence and it relieves stress over the unknown.


Many months ago I wrote an article on the Titanic Syndrome.

The US Economy (and our banking system in particular) is a lot like the Titanic that night in the North Atlantic.  We were going too fast (and still are).  The economy overheated (many thanks to the Fed's loose money policies, excessive risk taking by the banks, Fannie Mae and Freddie Mac's irresponsible lending standards ... but also the excessive use of debt and consumption by the American public).

We also didn't have the appropriate safety mechanisms in place - most notably personal savings.  We were all enjoying a party figuring the US economy was unsinkable - housing prices never go down, do they?  None of the passengers understood how the ship operated or what to do in the case of an emergency.  If they had, they might have questioned how fast they were going in iceberg infested waters.

Meanwhile the Fed and the Treasury were spiking the punch.  (That last part wasn't in the Titanic story - but it was going on in our economy.) ...

Nothing has changed.  The ship is still in iceberg infested waters.  We're still going too fast (especially after having already hit one iceberg) and the punch is still spiked.   Woo Whoo, Let's Party!

This discussion ... these warnings ... they actually give you an edge.

Once you realize that you ARE on the Titanic, that it IS going too fast, that we are in iceberg infested waters and that the ship's captains have no idea what they're doing; you are more likely to stay away from the spiked punch, keep your lifejacket nearby and stay up on deck near one of the few lifeboats that exist.


Would I rather be on a modern cruize liner sailing in the Bahama's (but not during hurricane season)?  You bet.  That would be great.  But it isn't happening.  We're on the Titanic.  We're in the north Atlantic and there are loads of icebergs.  Get over it.  This is the reality.

Wishing it weren't so doesn't change anything.  As I have said many times before - "Hope is not a good strategy."


Alexis Martin Neely is an estate planning attorney whose book on the basics of estate planning (and it is the best of it's type) is titled "Wear Clean Underwear" after the warnings we all got from Mom on what to do to be prepared in case we were in an accident and had to go to the hospital.

I mean, how embarassing!

The same rules apply here.  If something goes wrong and there is an accident, you want to be prepared.  You need to be prepared.  By all means, check your shorts and be sure you're wearing clean underwear.


"To know and not to do is not to know." - Proverb

“The great end of knowledge is not knowledge, but action.” Thomas Henry Huxley

So now I have blessed you with some knowledge.  You now know a little more about what kind of ship you're on and where you are headed (we're all on this ship and we're all going in the same direction).  But what do you do about it?

Here is that bullet list again:

  • Are you saving money? - You should be saving 10-15% of your income.  (If you're not, we have tools like our Cash Flow Hydrant™ that can help you.)
  • Is your investment portfolio built to withstand the high probability of a serious market correction or possible implosion of our financial system? - Talk with your investment advisor (just make sure they are a fiduciary professional).
  • Are your assets protected from predators & creditors? - There are simple ways to manage your wealth that do protect your assets.  Ask your financial professional how.
  • Is your wealth as protected as possible from tax authorities who will need to confiscate every dollar they can find to help balance their budget? - Talk to your tax professional.
  • Is your lifestyle congruent with the things that are really important to you (like family, friends, etc.)?  That is a primary focus of the ALTUS Planning Process™.
  • If you die, do you have an estate plan in place to transfer your assets the way you want?  Get together with an Estate Planning attorney and create/review your estate plan.

If you're not covering these six basic areas, you are hoping that what I am telling you doesn't happen.  You are choosing to go back to the party in the bowels of the Titanic, to drink the spiked punch and hope the captain (and the rest of us) is lucky and we don't hit any icebergs.

I think I'll stay on deck.  I've got a lifeboat if you want to stay here with me.

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Here is a little more on this subject including some great articles published by others ...

When You're Ready for the Next Step

Two great articles were published this week about getting professional financial advice.  This is not something you can effectively do yourself.  Read these and put them into action:

"Eleven Principles for Selecting an Advisor" is the best article I have ever seen written on the subject.  It's even better than mine!  Check it out at http://bit.ly/T911Y

"Five Tough Questions for Your Investment Advisor" helps you get an understanding in just a couple of minutes of whether or not you should be working with the person giving you investment advice.  Warning: the author confuses"financial advisor" with "investment advisor."  They are different.  A good financial advisor will do a lot more than provide investment advice. Here's the article - http://bit.ly/TyekQ

I'm Not the Only One Saying We're in Trouble

Nassim Taleb is the author of "The Black Swan" and was one of the few who was firing off warning shots years ago about the inherent risks in our current banking and finance system.  While many have tried to say this crisis was a "Black Swan" event and nobody could have seen it coming, Nassim argues that it was perfectly predictable. The central bankers "acted like airline pilots who had never heard of hurricanes."

Read this short and powerful interview with Nassim Taleb - http://bit.ly/24Nqf0

The most important article to read in order to get your head around all of this is Mish's Fed Uncertainty Principle which was written back in April of 2008 (before the really bad problems started to show themselves).  Again, I am not into conspiracies.  I won't say this was done intentionally by a few guys in a smoke-filled back room, but there were no safeguards in place to prevent it from happening by accident, and that is exactly what has occurred.

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Last Updated on Saturday, 05 December 2009 21:31