The Evaporation of Money
This week, I packed up my family in the motor home and we’re headed down to Arizona for a visit…. to hang out with some good friends and enjoy some of their moderate weather now that it is winter time.
By the time you read this, I will be flying down I25 heading to Albuquerque… Don’t worry, I’ll try and shoot a video of what its like to trade going 80 miles an hour!
Anyway, as I was driving down I25, I couldn’t help but remember the first time I moved to Arizona many years ago. I will never forget the day I arrived. I opened my truck door… and as soon as I stepped outside to my new surroundings, it was like a blast of hot air hit me square in the face. Talk about a “warm welcome”. I think that kind of re-defines the term.
In that moment, I realized two things: First, that I was going be living in a Crock Pot.
Second, the only way I was going to survive the summers was a swimming pool.
Now I know swimming pools are not exactly environmentally friendly. In fact, an average sized swimming pool looses about 500 gallons of water per year to nothing more than evaporation in the heat.
Think about that.
So if a pool sat empty… no cannonballs, water fights, biggest splash contests, or sudden leaks.. for a year, it would loose about 500 gallons… that’s a lot of water!
And unfortunately water isn’t the only thing that is evaporating these days. There is something far more concerning that is also disappearing in to thin air… that is the value of the Dollar.
Analysts have estimated that since 1971, the US dollar has declined in value by a whopping 82%.
For example, in 1971, a US postage stamp costs 8 cents. Now, a stamp costs 44 cents.
Or, in 1971, the median home price was $25,000. The median home price in 2009 (even with the massive housing crisis) was $215,000.
That means money sitting in regular savings accounts, low yield mutual funds, or locked up in risky real estate will not retain its value . While it sits ready for a rainy day, the value is evaporating.
Just like I had to figure out a way to survive the summers in Arizona, I also had to figure out a way for my investments to survive the eroding value of the Dollar. Fortunately, I found credit spreads. Which didn’t just compensate for the loss in value, it also helped me build long term wealth. Now I don’t have to worry because this strategy has worked for investors during in any market condition…
Do you have an example of how the value of our money is evaporating? Leave a comment below and tell me about it… and how you are combating it.
Talk to you soon,
Jeffrey Ziegler
2 Responses to “The Evaporation of Money”
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Cost of college education compared to the return on investment in employment years. Stats are disturbing. Thank God for Credit Spreads!
Jeffrey,
Larry Edelson(who is affiliated with Martin Weiss of Money and Markets) has published what I believe will happen to the US Dollar:
http://finance.uncommonwisdomdaily.com/bernankes-secret-debt-solution-to-end-the-financial-crisis/?sc=G100&ec=95050&gclid=CIGz-sLWvJwCFSa0sgodlhwFoQ
Have a nice vacation in Arizona.
Jack