Consider using these 5 E-valuation factors to avoid a financial rip tide: learn to thrive, not just survive, in these trying economic times

October 13, 2009 · Posted in Bad Credit Loans 

These are frustrating economic times.  Stress and anxiety is high.  We all want to know what is happening out there in our economy and business landscape.

 

Is the de-leveraging over or is there more downside to come?  What is causing all this turmoil to occur?  How do we survive?

 

Let me suggest two key themes to consider in addressing these questions.

 

1) Obtain more financial education to understand; increase your financial literacy to comprehend; and search for alternative strategies to create wealth.  Steve Forbes says “financial education and the resulting empowerment is the key to recovery from this ongoing financial crisis.”

 

2) Use the 5 E’s that are presented below as an evaluation framework to understand the scope, magnitude and drivers of this change.  Stay calm and position yourself to thrive not just survive.  Here is an example of a situation that frequency occurs in the summer time around popular beach destinations.  Rip tides occur and some one not from the area drowns.  Many tourists are panicked, full of stress and anxiety, and stay out of the water for fear of what might happen to them … all they want to do is survive.  Yet the locals understand what is happening and how to work their way out of a rip tide and not just survive but thrive and have a great day at the beach.

 

Now, let me describe the 5 E’s of this evaluation framework.  A few years ago I became aware of this framework as I was increasing my financial literacy and it helps me stay calm, understand the drivers of the change, and open my eyes to consider alternative wealth creating strategies as conventional wisdom is not working.

 

1 – Energy is no longer cheap.  We have reached point of peak oil … meaning easy stuff to find and drill has occurred.  While more oil is being found, it will be very expensive to explore, drill, pump, and distribute the oil to customers.  So more and more of our budget will be used to pay for energy hence on of the interests in alternative energy sources.

 

2 – from west to East … there is a transfer of wealth and power underway to the Asia Pacific region, especially China.  The USA is currently the world’s largest economy however it is estimated that China will be the world’s largest economy by the middle of this decade.  A lot of churn and turmoil is associated with this change.

 

3 – the (USA) Empire is peaking out.  The cost of having so many troops in so many parts of the globe and the cost of increasing the size and services of the government at home in the United States, is a key part of causing the country to go broke.

 

4 – the Experiment with paper money is running its course.  This is known as fiat currency where your money is not backed by anything tangible like gold.  When the central bank has the ability to increase money supply by printing more money, you get inflation and all the horrors associated with this activity.  You might not know this but the current federal reserve system is the USA’s fourth attempt at a central bank and each of the previous attempts did not end nicely … most likely neither will the current experiment with this central banking system.

 

5 -  the Economic cycle of the past 25-30 years, based on easy to obtain money through loans at a low cost (ie low interest rates) is over.  The growth, expansion, and consumer society that we now say is the basis for our economic system is over.  Something new will take its place.

 

By understanding that you can swim at a calm pace, in a diagonal from the current that is pulling you out to the open sea and knowing that you soon will be out of the rip tide, you will be able to go on and have a great day at the beach … you will have learned to thrive not just survive.

 

It is the same type of situation with our financial crisis.  Obtain education in order to understand what is happening in the context of this E-valuation framework.

 

Stay calm knowing that conventional wisdom, the stuff we learned and grew up doing all of our life, is not working anymore.  So find and pursue alternative wealth creating strategies to get out of the financial rip tide; think out of the box; plug-in and get on with our economic lives.

 

As an example of alternative wealth creating strategies … consider investments in non dollar-denominated assets … perhaps emerging markets … perhaps energy assets that are inherently useful like oil rigs, hydropower, or methanol plants … perhaps precious metals, water rights, oil, natural gas, potash mines, or gold mines … things hard to build, difficult to replace, and costly to substitute … definitely not financial stocks, definitely not retail stocks, definitely not commercial property.

 

In addition, a good book to read would be “The Bull Hunter” by Dan Denning.

 

I will continue to build upon “the 5 E’s” framework and introduce alternative wealth creating strategies to consider like emerging markets, oil rigs, precious metals and potash mines, in future articles and updates at my blog, over the next few weeks (see link below).

Early in his career, Mike was an engineer with a large aerospace company. For many years, he was with a “marquee” consulting firm where he worked extensively with clients all around the world and became know as an American globalist. Most recently he has been providing technology, business, and management advisory services as a self-employed entrepreneur.

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