Is Massive Inflation Right Around the Corner?

The Official Geezer Guide - Your guide to supplementing your retirement income, saving money and protecting and growing your investments.

Volume 2, Issue 2, October 2010

This month's articles:

Off the Cuff

1. Is Massive Inflation Right Around the Corner?
2. Make Money Buying and Selling Hot Toys for Christmas
3. Make Money Blogging From Home

Off the Cuff

I received a telephone call last week from an individual identifying himself as an Verizon (my phone company) Service Technician who was conducting a test on the telephone lines. He stated that to complete the test I should touch nine(9), zero(0), the pound sign (#), and then hang up.

Luckily, I was suspicious and refused.

I called Verizon Customer service to ask about this. They informed that by pushing 90# you give the requesting individual full access to your telephone line. This enables them to place long distance calls billed to your home phone number –and yes, you get the bill.

I also learned that this scam has been originating from many jails and prisons   DO NOT press 90# for ANYONE.

My readers know that I am a fan of niche marketing. Well I recently found a great niche product that is both environmentally friendly and unlike most so called “green” products which are usually more expensive, this one saves you money. The product is an environmentally friendly laundry detergent call soap nuts. What’s a soap nut you ask? Just click here to see my listing on eBay. I was pretty skeptical of these things at first, but we have been using them for three weeks now and they are awesome. Our clothes smell fresher, are soft (no fabric softener needed) and they are really-really clean.

A few of you are interested in learning how to make money with affiliate marketing. Here is a great free eBook called The Affiliate Masters Course –that’s right its completely free and you don’t even have to give up your email address. Just go to this page to download: http://www.skipmcgrath.com/downloads/affiliate-masters-course.shtml.

Christmas is just around the corner and one of the big expenses you will face is buying presents. If you are creative, think about making some of your gifts this year. Some senior citizens crochet, knit, sew, and do woodworking, painting, photography and other hobbies. Put your hobbies and interests to work. Make a gift for someone on your list. It will be both personal and appreciated because of the work you put into it.

If you are a gardener, buy an inexpensive pot and decorate it. Buy a reasonably priced plant and put it into the pot for a lovely and thoughtful gift. Copy a precious photo and put it in a frame that you made or found at a discount store. Decorate the frame so it is personal. Take a look at your hobbies and see which ones can be used to create a unique gift for that special friend or family member. And if you have grandkids, don’t forget looking for used toys. Children under the age of seven, really don’t know --or care about the difference. Obviously you only want to buy toys in good condition, but they are out there at garage sales, thrift shops and on eBay. I was looking on eBay this week and found a woman selling a large plastic covered bucket full of Legos that I won for $14.50. My granddaughter loves Legos --and believe me she will be more amazed by the sheer quantity –then by the lack of a box.

If you want to learn where to buy hot toys cheap and how to make money this Christmas season selling toys on eBay, take a look at our second article.

Lets get started with this month's articles:

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1. Is Massive Inflation Right Around the Corner?

I am sorry this article is so long –but as Thomas Jefferson once said: “I lack the time to make it shorter.” In any event I really believe that it is important to your financial health, so I recommend you take the time to read it.

The recession hurts everyone –but seniors living on a fixed income are hurt the most. The only good thing that happened over the past year is that we didn’t get the massive overall inflation that many predicted. Companies hurting for business in the US keep cutting prices and that kept the overall rates low. But, (there is always a “but”) unfortunately most seniors don’t spend that much on consumer products. Most of our spending goes for food, housing, utilities, transportation and local taxes.

The problem for seniors is that the government follows the Consumer Price Index –not these underlying costs to determine SS cost of living increase (COLA). So that means that SS recipients will not get a cost of living increase this year. I don’t know about you, but I am paying more for gas, home heating, food and my local taxes are higher this year than last.

I did get a small property tax decrease because the value of my home dropped, but other local taxes on telephone, sodas and liquor and utilities and sales tax went up more than the tiny reduction on my property taxes.

The other factor affecting our prices comes from the developing countries whose economies are soaring. Although the US and Europe are not consuming as many commodities and resources, the rest of the world, led by China and India, are.

• Copper has jumped 188 percent from a recent low,
• Aluminum up 33%
• Corn has exploded 58 percent,
• Soybeans have surged up over 26%
• Wheat has climbed 65 percent,
• Beef prices have climbed 21% and are still going up,
• And sugar has risen 90 percent
• Gold has surged over $300 an ounce from its February low,
• Silver has climbed from $16 to over $23 in less than 3 months
• Oil is testing the $80 level
• On average, state and local taxes and fees increased by 9% across the country.

It’s easy to see why food prices are climbing, and soon the higher prices of commodities will start to impact our costs. As for sales and local taxes & fees you can feel those now.

There are two forces coming into play that will affect inflation over the next couple of years:

1. A Sinking Dollar – Chairman Bernake of the Federal Reserve has made it clear that he intends to stimulate the economy by printing more dollars. This lowers the value of the dollar versus other hard-money currencies. Japan and European central bankers have all said they will follow the dollar down, but you can count on us losing value against other currencies from countries that export commodities such as China, India, Brazil, Australia and Canada. Since oil is priced in dollars this will soon begin raising the price of oil first –and then gasoline and natural gas will follow within a few weeks.
2. Increased Demand – As I pointed out above, a huge part of the world is not in a recession. In fact many countries are growing at incredible rates. We think of GDP growth in the US as excellent when it gets up to 4%. But countries such as Singapore, India, The Philippines, Indonesia, Turkey, Brazil, China, Australia and others are seeing growth rates between 6 % and 13%. These economies are consuming more and more commodities and food. Beef and Pork consumption in just China has risen over 33% in one year. China and India’s oil imports are up 12% and 16% respectively.The law of supply and demand is absolute. Although we are importing fewer foodstuffs and commodities than we did when the economy was growing, we are still consuming a great deal. It is just a question of time until these price increases catch up to us.

What to do now?

As seniors we are especially vulnerable to these coming price increases. Most of us are living on fixed incomes or savings from our IRA’s and 401K accounts. If you are living on social security and some small savings you will be especially hurt. Those of us who have some investment income have a few more options. Here are a few things you can do now:

• If you have spare cash, you can stock up on consumable items such as light bulbs, detergents, toilet paper and paper towels, canned goods and so on. You don’t need to rush out and buy everything at once. We still have a few months until inflation takes off –it will probably start right after the first of the year. And, even then, it will start slowly. As soon as you see the CPI (Consumer Price Index) or the WPI (Wholesale Price Index) starting to creep upward then you want to accelerate your buying as that is how it will start.
• If you own a gas-guzzler, now is the time to trade it in for something that consumes less. Personally I will be amazed if gas prices in the US don’t get to at least $5 gallon and they could go higher. Gasoline in Europe is already over $8 gallon in many countries. Of course a lot of that is tax –but its also gone up due to the falling Euro and the same thing will happen here as the dollar falls.Used car prices are really cheap now so you can pick up some good values. Don’t buy a Hybrid or a Stupid Car (aka the Smart Car). The hybrids cost too much for what you get back and the Stupid Cars are just too dangerous. In fact don’t buy a new car at all. Instead buy a late model used compact that gets decent mileage.
• Look at your investment accounts with an eye to adding some precious metals (gold, silver, palladium, etc) funds to you mix. Most long-term investment advisors usually recommend you keep at least 5% of your assets in these funds or stocks. Lately however, many advisors are upping that to 10%. Personally I am at 20% --but you make your own decision. The most popular way to buy gold and silver is through a no-load ETF that actually owns the physical metals. The largest are symbol GLD for gold and SLV for silver. You can also buy a group of large gold mining companies with the fund GDX.Gold has been on a tear lately and I expect a sharp pull back any day now. If you have gold just hold on to it –the pullback will be very temporary. If you don’t then wait for a pullback of at least 5% (it could be as much as 10%) before jumping in. Then hold on for the ride. Respected gold analysts (not the crazy gold bugs) are forecasting gold at $1500 ounce in 3 to 6 months and eventually many think it could go to the $1800-$2000 range within a year.
• Historically when inflation rears its head, the stock market goes up. That may sound counter-intuitive, but stocks represent a store of value too. If you look at past inflationary periods over the last 100 years, quality stocks have almost always tracked the rise in inflation. In some periods they have actually grown more than inflation. This goes on until the Federal Reserve says “enough,” and steps in to raise interests rates to cool the economy.The action to take here is to make sure you own quality stocks in larger companies. When inflation hits there is a flight to quality. This is when you want to be in big energy companies like Conoco, Exxon and Shell and solid tech companies such as Intel and IBM. You should also own a mix of top-notch foreign stocks. The overseas markets are doing well and as the dollar falls the price of those stocks will rise as well. If you don’t want to research foreign companies, there are plenty of good mutual funds from Vanguard, Fidelity and others that feature exposure to Asia and other developing countries.
• Lastly if you are really stretched financially and do not have the funds to do any of these things, then you need to find a way to supplement your income. The next article has a way to make some extra money this Christmas, or you can look at the Geezer Guide books on this site, or one of the following new books from my other website, SkipMcGrath.com. Some recent titles that people have had pretty good success with include:
  • How to Make Money Blogging From Home
  • The Virtual Peddler
  • How To Make a Living Working from Home.

Any of those can help you find ways to earn extra money as all of us are going to need it during the coming couple of years.

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2. Make Money Buying and Selling Hot Toys for Christmas

Every year eBay PowerSeller Jennie Hunt comes out with her Holiday Toy Guide. This is probably one of the best values of any program I recommend because almost everyone who tries finds success. Now you aren’t going to get rich, but hundreds of my readers have used this program over the past five years to make an extra one or two thousand dollars between November 1 and January 15^th. (yes the Christmas selling season goes on until the middle of January).

If you are an eBay seller, you probably can’t help but think about how the economy might effect the biggest selling season of the year… holiday toy sales.

It would be unwise to ignore the status of the economy and forgetting how this selling season COULD be affected. It is equally important to examine strategies we, as sellers, can put into place that will help ensure a profitable selling season regardless of how glum things may look today.

What We Can Rely On

1. The children always come first – Parents, grandparents, aunts and uncles… no matter what… will find a way to make their child’s holiday one to remember. Even if it means cutting the budget elsewhere, they will find a way to buy toys and gifts for the children in their lives.
2. Even in a slow economy, the holidays still bring out good cheer – The holidays are known for being a time for hope and generosity. Although you wouldn’t always recognize this when customers fight over the last (latest and greatest) Elmo on the shelves… the motive is still to bring cheer to the loved ones in their lives during the holidays.
3. Most people don’t know how to budget – Consumer debt in our country is through the roof… we don’t really understand how to control spending… and, although I can’t encourage getting into more debt, I think it is safe to assume that people will spend what they feel like they have to spend to make the people in their lives happy this year. This means people are going to be buying the hottest toys for the children in their lives… even if it means going into debt.
4. Even if parents can’t afford to, they will find a way to buy toys for their children – And, if they can’t afford to get the newest toys for this year… they will buy used. Did you know that used toys sell well all year long – and they do quite well during the holiday season too?

I’m convinced that one of the best strategies toy sellers can implement this holiday season is to offer both used and new toys to their customers.

Even though new toys traditionally skyrocket during the holidays… and that means sellers can buy them at full retail prices only to see them double or triple on eBay… there can be a much higher profit margin when selling used toys. You can pick up gently used toys at yard sales, consignment shops, estate sales and thrift stores for pennies on the dollar and turn them around for 100-200% profit on eBay!

But, it all comes down to knowing what toys sell during the holiday season

The Holiday Toy Guide is created to help you make the most from your toy selling efforts on eBay… to help you know what is selling (and what isn’t!)… and in an unpredictable economy – this is critical information.

Jennie has done all the research. She tells you what the hot toys are going to be, how and where to find them, how much to pay for them and how to sell them at a more than fair profit. Over the past years I have received glowing emails from my readers who reported making thousands of dollars between Halloween and Christmas.

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3. Make Money Blogging From Home

Blogging may be the perfect moneymaking activity for seniors. It doesn’t matter how active or healthy you are. If you can type, point and click you can write a blog.

The real key is: “Do you have something to say that people want to hear?” If you do, then a blog can be a steady source of income. Blogs can be about anything –but they should be about something you love and something you know about. Do you have a craft or a hobby, or a life-skill that you can share with others? If so, you can make money writing about it.

One older, but not yet senior, lady I know lost her job as a Special Education instructor at a university where she taught teachers how to teach children challenged with Autism, AD&D and other problems. Fortunately she had started blogging about a year before she lost her job. Today her blog is her only source of income –and she is making more than when she was teaching. Another fellow is a collector of vintage fishing lures. He now blogs about them and has a list of over 3000 followers. He makes money from advertising on his blog and from selling his lures to his followers.

I could go on and on with examples –but I think you get the point. But, you may be wondering how you make money with a blog.

There are several ways to make money blogging:

Affiliate programs – We show you how to locate the best affiliate programs and how to incorporate them into your blog –and how to get people to click on your links so you can actually earn an affiliate income.

Google AdSense – AdSense is Google’s advertising program for bloggers and website owners. It is free to join and you can make thousands of dollars a month from people clicking on your Google ads if you know how to do it.

ClickBank – ClickBank is a source of thousands of information products that are ready made for you to sell. All you have to do is mention them in your blog and when readers purchase, ClickBank sends you a commission check. ClickBank pays every week, so this is one of the fastest ways to make money blogging.

Advertising –There are dozens of companies that will pay to place advertising banners on your blog. This is actually my least favorite way to make money from blogging, but it does work.

The Blog Market – It may surprise you to know that once a blog has steady readers there is a good market to sell your blog. Even small niche blogs can sell for thousands of dollars.

You can learn how to blog with my book, How To Make Money Blogging From Home.

I teamed up with my Webmaster, Marsha Perry, who is an expert on WordPress Blogs. WordPress is free blogging software that allows anyone to launch a blog with no technical skills. If you can follow simple instructions –you can have a blog up and running within a couple of hours.

The book is divided in two parts. In Part-One, I take you through how to blog, how to get traffic and how to monetize your blog to earn income. In Part-Two, Marsha guides you step-by-simple-step through setting up your blog.

So take a look and learn more about How To Make Money Blogging From Home.

That’s it for now. You are probably wondering why you haven’t been getting the newsletter –well we were struggling for a while but now everything is back on track and you should see every issue monthly from now on.

Skip McGrath
Head Geezer
Official Geezer Guides, Inc.

P.S. If you missed the last issue, check out our newsletter archives.

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