“Well that’s fantastic. A really smart decision, young man. We can put that check in a money market mutual fund, then we’ll re-invest the earnings into foreign currency accounts with compounding interest aaaand it’s gone.” – South Park
I’ll have you know there are at least three things that you can use an empty potato chip bag for.
I was reading Bison Prepper (LINK) (and you should, too) last week when Lord Bison mentioned that stocking up on things that you used regularly as consumables was a survival strategy. It is. Beyond that, it’s also an investment strategy.
In the world of investment, when you buy a stock thinking the price is going to go up, it’s called “going long.” If you were to buy Apple® stock thinking that the world hadn’t had enough iPhones®, iPads©, or iCrap™, you would be “going long.” For this strategy to pay off, when you finally decided to sell Apple©, it would have to be worth more than when you bought it. Buy low, sell high.
Duh.
But I started this post by writing about consumables. What’s the deal? Those aren’t investments, right?
I recalled reading another article a few years ago about a financial writer showing up on the Tonight Show™ with Johnny Carson, so I looked for the interview and found it – a whopping 200 people had watched it, even though it had a glimpse of Susan Sarandon while she was still cute and before her eyes popped out of her head like they were trying to escape. The writer that Johnny was interviewing was Andrew Tobias. Johnny said in passing: “I like how you said that if you had $1000, you should invest in tuna.”
I was really shocked when he said, “Sit on it.”
Tobias responded: “If you want to make 40% tax free on $1000 you can . . . if you buy tuna fish . . . and shaving cream on sale, and get a case discount.” The audience didn’t laugh – they were living in pretty uncertain times and the advice was serious.
Andrew Tobias posted this clip on YouTube®, and was really irritated with himself – since his jacket was buttoned it looked like he was forming a human air scoop as he sat down with Johnny.
Back when this clip was filmed was in the late 1970’s, and the economy was in trouble. The interest rate was high – a mortgage (if you had great credit) would charge you really high rates, between 10% and 14% . . . compared to a tiny 4% or so today. Inflation for nearly everything you could buy was running around 10%.
The entire key to making this odd investment strategy work is that you have to buy things that you’ll actually use. Sure, Wal-Mart® sells five-gallon troughs of flaming pickles soaked in Cheeze® Ballz™, but will you actually eat that?
It was even worse when she flipped off people we passed.
What’s a list of things that most people buy that this would work for?
- Tuna (and long shelf life canned food) – especially good if you need to keep your mercury intake up.
- Shaving cream and razors – buy extra if your wife is a Kardashian or you’ll look like you’re married to a Chia Pet™.
- Various condiments – mustard keeps forever, and can be used to slow Kardashian hair regrowth.
- Laundry soap – I have to keep this on the list, my hands are Tide®.
- Paper goods – I’ll make a toilet paper joke, since I’m on a roll.
- Wheat, rice, and other grains (properly stored)
- Honey – They’ve found 5000 year old honey that is still edible, so it probably gets the nod as the most stable food ever. Plus it’s really handy to have local honey if you’re in Russia – I hear it’s made there by cagey bees.
- Ammunition – Don’t be like JFK and have this be the last thing on your mind.
Now, you should be smart about this – if your family won’t eat cans of clams, buying them when they’re super cheap won’t really help you because then you have cans of clams that no one will eat, until there’s a food drive, and then you give them the clams. If this sounds oddly specific, well, we don’t have canned clams anymore. Likewise, if you decide to grow a beard, six cases of shaving cream suddenly become worthless until you decide to shave again.
The Mrs. didn’t buy the line, “But she looked so lonely, like she could use a good home.”
And don’t be nutty. If you live in a tiny house, putting several thousand cubic feet of tuna and wheat might not be the greatest idea. Unless you like sleeping on cans of tuna. There’s a limit. When Tobias gave that advice, he suggested that it could be used for $1000 worth of stuff. Today that translates into about $4,500 worth of stuff, if the inflation calculator is to be trusted. That’s certainly a lot, and would translate into 20 or so tons of wheat, but you’d probably have to stack hide some of it under the bed.
One dangerous point: if you buy something, like, say, wine and get a 10% case discount, it doesn’t really help your cause if you drink the wine twice as fast. Or if when you see a Ding-Dong®, you immediately rip open the silvery plastic sleeve and try to suck out the “cream” filling until you are sitting in the corner in a sugar coma. So you might want to reconsider stocking up on things where your self-control will turn a savings into a disaster for your liver or waistline.
9 out of 10 doctors recommend water over alcoholic beverages for health reasons. The other doctor is from Flint, Michigan.
In the 1970’s, you could do this strategy with nearly anything since prices were going up on everything, as long as you didn’t have to borrow the money – interest rates on credit cards were 18%. As opposed to the 18% today. Hmmm.
Regardless, if you have high-interest debt, get rid of it. The sooner the better. The future is uncertain, so getting rid of debt is a certain way to be in better financial shape.
In the last decade, inflation is most prominent in two things that you can’t collect like tuna: health care and college tuition. Oh, sure, you could pre-injure yourself, but who has the time? Likewise, you could avoid steep college tuition hikes by sending your three year old to college, but that would make congress unhappy. They hate competition that’s smarter than them.
The best information that I can find is that 401k plans returned an average of 7% for the last five years. Better than a jab in the eye with a sharpened terrier, and probably still a smart thing to do. I have one. The beauty of mine is that my company kicks in an instant match – and whatever match I get is an immediate return – if the company matches dollar for dollar, it’s an immediate 100% return. If it “only” matches $0.50 on the dollar, it’s still an immediate 50% return. I’ll pay taxes on it after you begin to pull it out, assuming that it hasn’t been confiscated by Bernie Sanders to fund his “waterslides for the poor” initiative.
But the 401k immediate return is hard to say no to.
For me? I’ll take belt sanders over Bernie Sanders any day.
But I can easily make 30% to 40% return tax free on toilet paper, if i buy it on sale, and in bulk. And I’ll never pay taxes on that return. It’s just free money – again, assuming I don’t have any debt.
If I have a mortgage of $100,000 at 4%, and I pay it off, I’ll make a $4,000 return before taxes. Not bad, but after taxes, it’s really as low as $2,000 depending on the rest of my income. But if I get a sweet deal on non-dairy gluten-free vanilla creamer, I get all of the money I save.
There is one other advantage of putting some of your money into stuff that you’d use – you’re making yourself more resilient. If the dollar (the United States one, not one of the phony dollars they use in places like Zimbabwe or Philadelphia) were to weaken, you have investments in things other than dollars. I heard a story of a German boy who got a gold coin as a tip while working at a hotel. After the hyperinflation of the Weimar Republic, that same German boy was able to buy the same hotel for that same gold coin. Of course then it became a target for B-17 bombers, but who’s keeping score?
Oh, yeah. Everybody. Except the French – they’re waiting for their record to improve.
A French border guard was questioning a German. “Occupation?” “No,” replied the German. “Just visiting.”
The idea that I’m trying to convince you of is that you should think of your average daily purchases as if they were investments – because they are. It’s not only stocks, bonds, precious metals and a 401k that are investments – what you buy on a day to day basis and how much you pay for it can also be an investment.
The other thing that many people overlook when they think of investments is their time. How are you spending yours? You can, like me, spend your time in a PEZ®-addled haze, watching Bojack Horseman™ on an endless Netflix© loop, or you can spend it productively, making yourself better. That’s tax free, too.
Remember, investment means more than stocks and bonds. It’s the things you buy, the way you spend your time, and avoiding B-17 bombers by not buying German hotels.