Is it possible to have up to $100 million and not have a penny to spend?
Actually, yes. We’ll show you how shortly — and why you wouldn’t want to spend any of the family fortune anyway. Talk about NOT spoiling the grandkids.
Goldman Sachs and the Trade of the Century
Just as arms firms make a lot of money from conventional warfare, there are firms that make a lot of money from currency warfare. One of those firms is Goldman Sachs.
So we wondered what Goldman Sachs makes of it. Last week Goldman Sachs published a note saying, ‘One of the best long term trades out there at the moment is long euro versus short Aussie.’ The big banking firm is so keen on this trade the Wall Street Journal reported someone there tagged it ‘the trade of the century’.
That got Dan Denning over at the The Denning Report thinking. He posed this question to his readers last week:
‘How could this turn into the trade of the century?
‘A fall in the Aussie dollar by 50% (against the US dollar, the euro, or both) would do the trick. You’d see the Aussie gold price catch up with the US price. But the currency story would really be a reaction and not the catalyst.
‘The catalyst would be weaker iron ore prices, a falling terms of trade, bigger federal budget deficits, and no other sector of the economy capable of compensating for the end of the mining boom. Australian financial assets would be repriced for the ‘new normal’ I’ve spoken about.’
We hope the new normal for Australia is a bit rosier than that.
But in investing it pays to at least consider the worst case scenario. One way is to consider Dan’s strategy in the face of the current economy. This strategy can play a key part in another investing strategy: building family wealth.
Your editor spent the weekend reading Bill and Will Bonner’s book Family Fortunes: How to Build Family Wealth and Hold On to It for 100 Years.
This brings us back to the $100 million you can’t spend. The reason you can’t spend it is you must do everything you can to protect your capital if you want to pass on your wealth to your children and grandchildren.
Now, $100 million is a lot. And it was just an example from the book. But believe it or not, the Bonners show that once you factor in inflation, taxes and an average return, there’s not much income left over from $100 million if you’re trying to grow that wealth in real terms for the next generation.
It sounds like a bummer at first. So does that leave any hope for the rest of us? Those of us just short of $100 million! Yes. The gist is to change the way you think about your retirement and family wealth.
But why would you do that?
Because the best way to survive a government debt crisis is not to depend on the State.
You can only get free of the State if you have your own independent wealth to back you up. And the great thing is that even a modest amount of capital can free you to follow dreams or to help your family in dozens of different ways.
Family Fortunes has plenty of ideas. We’ll share some of them on Saturday in Money Weekend. Stay tuned.
Co-Editor, Scoops Lane
From the Port Phillip Publishing Library
Special Report: How to Make Money from the End of the Mining Boom
Daily Reckoning: Electric Cars and Platinum Mines
Pursuit of Happiness: Mainstream Media Wakes Up on Retirement Savings
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Written by Callum Newman
Callum Newman is editor of the Money Morning weekend edition and co-editor of Port Phillip Publishing’s subscribers-only email Scoops Lane. (To have Money Morning delivered straight to your inbox you can subscribe for free here).
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